Can the Euro Sustain Support Near 1.1066 Against the US Dollar as the Outlook Remains Uncertain?

Modest buying supports the Euro against the US Dollar following a decline to a new 18-month low near 1.1066.
The US Dollar retains support as robust US CPI figures drive a further hawkish reassessment of Fed policy.
An extension of the ECB’s monetary tightening cycle beyond December appears unlikely.

Selling pressure on the Euro (EUR) eases as the US Dollar (USD) surrenders part of its early advance on Thursday, allowing EUR/USD a modest recovery. Having touched a new 18-month low near 1.1066 earlier in the day, the pair trades broadly unchanged around 1.1090 during European trading.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

After reaching a new 18-month peak of 103.08 earlier in the day, the US Dollar Index (DXY) pulls back towards 102.90 in the European session. The index tracks the Greenback against a basket of six major currencies.

Rising inflation in the United States (US) has prompted traders to further strengthen their hawkish expectations for the Federal Reserve (Fed), keeping the US Dollar’s outlook firm.

How Far Has CPI Shifted Fed Funds Futures Towards a Hawkish Outlook?

Despite the closure of US Treasury cash markets, Deutsche Bank analysts observe that the “hawkish implications from the CPI print continued to be felt in futures pricing yesterday.” According to the analysts, “Fed funds futures continued to shift in a hawkish direction, with pricing for the December meeting edging up to 28.5bps.” Looking further along the curve, they add that “expectations for the September 2027 meeting surged another +7bps to 82bps, although that’s edged back down to 77bps overnight,” highlighting the substantial reassessment of the Fed’s policy path following the CPI release.

Friday’s release of the October Producer Price Index (PPI) will provide the next test of the strength of US inflation.

For the Euro, broader pressure persists as market experts question whether the European Central Bank (ECB) can sustain monetary tightening over the longer term. Following two interest rate increases this year, the ECB is expected to announce another at its December meeting. Growing economic uncertainty, however, means that increase is expected to be the last in the cycle.

Could Eurozone Growth Concerns Limit Further ECB Tightening?

The current ECB tightening cycle could be approaching its conclusion, Rabobank strategists warn, observing that “the ECB, however, could prove to be reluctant to hike rates beyond December.” As they explain, “the last ECB press conference suggested that the Governing Council was becoming increasingly concerned about the growth outlook,” supporting expectations of a more cautious approach to additional rate increases after the December move.

EUR/USD Technical Analysis: Can the Pair Ease Its Bearish Bias?

Trading at 1.1091 on the daily chart, EUR/USD retains a bearish near-term outlook below the 20-day Exponential Moving Average (EMA) of 1.1185. This dynamic resistance continues to constrain the pair. Meanwhile, a Relative Strength Index (RSI) reading of 37 remains bearish without reaching oversold territory, suggesting continued downside pressure rather than exhaustion.

A daily close above the 20-day EMA near 1.1185, the immediate resistance level, would be required to soften the prevailing bearish bias. Until EUR/USD clears that moving average, recoveries are likely to attract selling, keeping the pair exposed to new lows in areas where the chart offers no established support levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro: Common Questions Answered

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries within the Eurozone, the Euro ranks as the world’s second-most traded currency after the US Dollar. Its share of all foreign exchange transactions stood at 31% in 2022, while average daily turnover exceeded $2.2 trillion. With an estimated 30% of all transactions, EUR/USD leads global currency-pair trading. It is followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What role does the ECB play in the Euro’s movements?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and overseeing monetary policy. Maintaining price stability is its core mandate, whether through containing inflation or supporting growth. Interest rate increases and reductions are its main policy tools. The Euro generally benefits when rates are relatively high, or expected to rise; the reverse also holds. Monetary policy is decided at eight ECB Governing Council meetings each year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

The Harmonised Index of Consumer Prices (HICP), which measures Eurozone inflation, provides an important economic gauge for the Euro. An inflation reading above expectations, particularly one exceeding the ECB’s 2% target, requires the central bank to increase interest rates to regain control over price pressures. When the region’s interest rates are relatively high compared with those elsewhere, global investors find it a more attractive destination for their funds, usually supporting the Euro.

Which economic releases can move the Euro?

The Euro can respond to economic releases because they offer a measure of the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength supports the Euro by drawing in additional foreign investment. It may also prompt the ECB to raise interest rates, directly strengthening the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Particular attention is paid to figures from Germany, France, Italy and Spain, the euro area’s four largest economies, which together represent 75% of the Eurozone economy.

Why is the Trade Balance important for the Euro?

The Trade Balance is another key release for the Euro, showing the gap between a country’s export earnings and its import spending over a specified period. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, lifting its value. A positive net Trade Balance therefore strengthens the currency, while a negative balance has the opposite effect.