EUR/USD’s short-term outlook has deteriorated steadily since the pair was rejected from the yearly highs near 1.2100 the figure. The break below the key 200-day Simple Moving Average (SMA) reinforces the downside bias and points to the risk of a deeper pullback ahead.
EUR/USD loses the grip on Wednesday, slipping back below the 1.1500 level and leaving behind a two-day recovery at the same time.
The marked retracement in the pair follows the resurgence of the bid bias in the US Dollar (USD), as investors continue to digest the Federal Reserve’s (Fed) decision to keep its interest rates unchanged, as broadly anticipated.
Against that, the US Dollar Index (DXY) extends its bounce past the key 100.00 hurdle, helped by rising US Treasury yields across the curve as well as unabated geopolitical concerns in the Middle East.
Fed keeps rates steady, signals higher for longer
The Fed kept rates unchanged at 3.50% to 3.75%, fully in line with expectations, but the overall message leans a touch more hawkish than the headline suggests.
The economic backdrop hasn’t changed much. Growth is still holding up, the labour market remains steady, and inflation is still described as somewhat elevated, with uncertainty lingering, especially around the Middle East.
The real shift comes from the projections. Policymakers nudged up their inflation outlook for 2026 and slightly lifted the longer-run rate, signalling that price pressures could stick around for longer.
At the same time, the rate path still points to only limited easing ahead, with a clear split inside the Fed. Some officials don’t see any cuts in 2026, and one even sees rates rising into 2027.
All in all: the Fed is in no rush. Rates are likely to stay higher for longer, and the bar for cuts remains high.
In his press conference, Chair Jerome Powell took a forceful but balanced approach, showing that the Fed doesn’t want to ease up in the foreseeable future, even if the economy is growing steadily thanks to strong consumption and higher productivity. The employment market is becoming cooler, although not very quickly. Sluggish job growth, though, continues to be a concern.
Inflation is still a big worry. Progress has stalled, and the recent spikes in energy costs and tariffs have complicated efforts to bring inflation down. Powell emphasized the importance of staying confident in the current disinflationary trend before considering any rate cuts.
He said that policy is close to neutral or slightly above it, and that further tightening is not anticipated. In the end, the Fed takes a steady, data-driven approach, staying in wait-and-see mode with high thresholds for cuts while keeping an eye on inflation threats.
ECB: steady for now, cautiously confident
The European Central Bank (ECB) is widely expected to keep rates unchanged at Thursday’s meeting, with a hold already well priced in.
Recent remarks from President Christine Lagarde suggest a relatively calm backdrop. Inflation is still seen returning to the 2% target over the medium term, although services inflation remains under close watch, and the disinflation process is likely to stretch into 2026.
Elsewhere, the fundamentals still look supportive. Wage growth remains firm, the labour market continues to hold up, and investment dynamics across the euro area remain stable. At the same time, Lagarde reiterated that while the ECB monitors the euro (EUR), it does not target it.
Markets currently price around 38 basis points of tightening by year-end, although the central bank continues to stress a cautious, data-dependent approach.
EUR positioning: still long, but losing momentum
The most recent statistics from the Commodity Futures Trading Commission (CFTC) show that people’s feelings have changed.
Speculators cut their net long holdings to around 105.1K contracts in the week ending March 10. This suggests that their bullish confidence is starting to die down.
At the same time, open interest grew to around 969.4K contracts, which means that new people are becoming involved in the market.
The mix is important. Even though net longs went down, the growth in open interest shows that new positions are being established, not simply closing old ones.
The essential point to take away is that positioning is still net long EUR, but the strength of that view is beginning to wane.
What’s next?
Near term: the US dollar will probably still be the major driver as markets deal with trade tensions and geopolitical uncertainties. The next important thing to happen is the ECB meeting on Thursday.
Risks: If things become worse in the Middle East, it might make people want to buy the US Dollar as a safe haven, which would hurt risk-sensitive assets. From a technical point of view, staying below the 200-day Simple Moving Average (SMA) for a long time would make a bigger retreat more likely.
Technical corner
In the daily chart, EUR/USD trades at 1.1475. The near-term bias is bearish, as spot holds below the descending 55- and 100-day Simple Moving Averages (SMAs) and continues to diverge from the rising 200-day SMA near 1.1680, underscoring a correction within the broader uptrend. The Relative Strength Index (RSI) at 34 shows weak momentum but stays above oversold territory, while the rising Average Directional Index (ADX) above 37 signals strengthening trend intensity in favour of sellers rather than a mere sideways consolidation.
Immediate resistance stands at 1.1491, where the recent breakdown area aligns just ahead of the 1.1578 horizontal cap, reinforcing the cluster of resistance beneath the 55-day SMA around 1.1730. A daily close above 1.1578 would ease downside pressure and expose the stronger barrier at 1.1766. On the downside, initial support emerges at 1.1469, with a clear break opening the way toward the next level at 1.1392, where buyers would need to respond to avoid a deeper extension of the current bearish phase.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line: USD still in charge
For now, EUR/USD is being driven far more by developments in Washington than by Frankfurt.
Until there is clearer guidance on the Fed’s path or a more convincing rebound in the euro area, upside in the pair is likely to remain limited.
At this stage, the US Dollar remains firmly in control.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
