Below 1.1100: EUR/USD price forecast points to renewed downside as US Dollar strengthens

• 1.1138 in focus as EUR/USD slips and the US Dollar leads its peers.
• Persistently high US core CPI prompts traders to increase bets on a hawkish Fed.
• Christine Lagarde to be replaced as ECB President by Klass Knot.

EUR/USD is down 0.2% at around 1.1138. The Euro (EUR) is losing ground against the US Dollar (USD) in Wednesday’s European session. Supporting the US Dollar and weighing on the pair are concerns that the Federal Reserve (Fed) could embark on an aggressive monetary tightening cycle to curb inflationary pressures that continue to accelerate.

At 102.51, the US Dollar Index (DXY) reaches a new high for almost four weeks during European trading. The index measures the Greenback against six major currencies.

Following October’s stronger-than-forecast United States (US) Consumer Price Index (CPI) release, financial markets have begun to price in a December interest rate increase of 50 basis points (bps), according to the CME FedWatch tool. The probability remains low, however, at around 13.5%.

In a note, Deutsche Bank strategists observed that the “monthly core CPI print for October was above consensus at +0.30% (vs. +0.2% expected).” The bank further noted that “it was the third consecutive month with core CPI at +0.3%, and if you take those three months together, the annualised pace for core CPI is running at +3.75%.” On the persistence of that strength, the bank said “that’s the fastest pace on that measure since April 2024, so it made it increasingly difficult to dismiss this as a blip.”

Turning to the headline figures, the bank emphasised that “meanwhile, the headline CPI numbers were faster still, with monthly headline CPI at +0.35% (vs. +0.3% expected), with the 3-month annualised pace at +5.72%.”

A leadership transition at the European Central Bank (ECB), meanwhile, is expected to sustain high volatility in the Euro.

ECB succession: Klaas Knot prepared to respond to future crises

A Financial Times interview with Dutch central banker Klaas Knot has drawn attention from Rabobank. A leading contender to succeed ECB President Christine Lagarde, Knot highlighted the Governing Council’s crisis-response credentials, stating that “If circumstances require it, we will not hesitate to take action.” Rather than a return to “50bps rate hikes due to geopolitically driven inflation,” analysts interpret his comments as addressing the opposite situation: a future European crisis “of a different nature.” Against that backdrop, Rabobank noted that Knot “would not rule out developing another, more tailored instrument,” suggesting that new policy tools could be introduced if conditions worsen again.

1.1138: EUR/USD Technical Outlook

At 1.1138 on the daily chart, EUR/USD retains a mildly bearish tone. The pair is trading below recent closing levels and just beneath its 20-day exponential moving average (EMA) of 1.1200, now an immediate obstacle.

Earlier oversold conditions this month have eased, but the 14-day Relative Strength Index (RSI), around 41 and below the neutral 50 mark, still signals prevailing downward pressure.

Immediate support lies at the recent 1.1104 low. A breach would leave 1.1000 exposed. Conversely, a rebound towards the 20-day EMA support zone around 1.1200 would offer an initial sign of stabilisation. To reduce the prevailing bearish bias and allow a wider corrective recovery, the pair would need to hold above that level.

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