Euro finds temporary support near 1.1066 against US Dollar, outlook remains uncertain

The Euro (EUR) finds cushion after posting a fresh 18-month low near 1.1066 against the US Dollar (USD) during the day, trading almost flat at around 1.1090 in the European trade. The EUR/USD pair rebounds slightly on Thursday as the US Dollar gives back some of its early gains.

In European session, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, retreats to near 102.90 after posting a fresh 18-month high at 103.08 during the day.

The outlook of the US Dollar remains firm as traders have raised hawkish Federal Reserve (Fed) expectations further in the wake of rising United States (US) inflation.

Fed funds futures extend hawkish repricing after CPI

Analysts at Deutsche Bank note that, even with US Treasury cash markets closed, the “hawkish implications from the CPI print continued to be felt in futures pricing yesterday.” They highlight that “Fed funds futures continued to shift in a hawkish direction, with pricing for the December meeting edging up to 28.5bps.” Further along the curve, Deutsche Bank points out that “expectations for the September 2027 meeting surged another +7bps to 82bps, although that’s edged back down to 77bps overnight,” underscoring how the CPI release has materially repriced the path of Fed policy.

Going forward, the US inflation strength would be tested by the Producer Price Index (PPI) data for October, which is scheduled for Friday.

Meanwhile, the Euro is broadly under pressure as market experts doubt that the monetary tightening cycle by the European Central Bank (ECB) will sustain in the long run. The ECB has raised interest rates twice this year and is expected to deliver one more in the December meeting, but that is expected to be its last one due to growing economic uncertainty.

Eurozone growth worries temper expectations for further ECB tightening

Strategists at Rabobank caution that the ECB may be nearing the end of its current tightening cycle, noting that “the ECB, however, could prove to be reluctant to hike rates beyond December.” They point out that “the last ECB press conference suggested that the Governing Council was becoming increasingly concerned about the growth outlook,” reinforcing the view that policymakers are likely to adopt a more cautious stance on further rate increases once the December move is out of the way.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1091, keeping a bearish near-term bias as spot holds below the 20-day Exponential Moving Average (EMA) at 1.1185. The pair remains capped by this dynamic barrier, while the Relative Strength Index (RSI) at 37 stays in bearish territory but above oversold, hinting at persistent downside pressure rather than exhaustion.

On the topside, immediate resistance is located at the 20-day EMA around 1.1185, and a daily close above this level would be needed to ease the current bearish tone. As long as EUR/USD remains under this moving average, rallies are likely to be sold, leaving the pair vulnerable to fresh lows into uncharted support levels on the chart.