EUR/USD: Door open to extra losses

EUR/USD is on the back foot for a fourth straight day, kicking off the week on a weak note as it hovers near the key 1.1500 support area. The pair remains under pressure amid the dollar’s sharp recovery, with traders still assessing Wednesday’s FOMC meeting. Meanwhile, investors continue to scale back expectations of a Fed rate cut by year-end, adding further support to the buck.

EUR/USD Technical Overview

The EUR/USD’s near-term outlook continues to deteriorate. The loss of the 1.1500 support level should open the door to a deeper pullback to, initially, the 1.1400 region.

Further losses target the November base at 1.1505 (November 3), while the loss of this levels should meet no relevant support until the August floor at 1.1391 (August 1), ahead of the significant 200-day SMA at 1.1322. Down from here emerges the weekly trough at 1.1210 (May 29).

On the flip side, the weekly top at 1.1728 (October 17) offers a minor hurdle prior to the October peak at 1.1778 (October 1). Further north comes the 2025 ceiling of 1.1918 (September 17), ahead of the 1.2000 yardstick.

Meanwhile, momentum indicators lose impetus: the Relative Strength Index (RSI) deflates to nearly 36, exposing extra downside risks, while the Average Directional Index (ADX) climbing to nearly 17 indicates that the ongoing trend seems to be picking up pace.

Still waiting for a catalyst

EUR/USD remains stuck in a rut, with the market clearly searching for direction. A dovish Fed, weaker demand for US assets, a cautious-for-longer ECB, or meaningful progress on trade could finally be the spark the Euro needs.

Fundamental Overview

EUR/USD is keeping its bearish tone at the start of the week, edging dangerously close to the key 1.1500 support area, also a three-month low, as spot logs a fourth straight day of losses.

The US Dollar’s (USD) momentum hasn’t let up either. The ongoing bid in the Greenback is pushing the US Dollar Index (DXY) to fresh three-month highs, hovering just below the psychological 100.00 level. That strength has been helped by another leg higher in US Treasury yields across the curve.

Shutdown standoff starts to bite

The government shutdown in Washington is dragging on, and it’s starting to hurt. Nearly a month in, lawmakers remain at an impasse. Over the weekend, President Trump again urged the Senate to scrap the filibuster, the 60-vote threshold that allows the minority to block most bills, so Republicans could push through funding without Democratic support.

The economic impact is becoming harder to ignore. Hundreds of thousands of federal workers are still without pay, public services are slowing, and business sentiment is taking a hit. Early signs of strain are showing up in hiring and GDP data, both flashing warning signals.

At 34 days and counting, this is now the second-longest shutdown in US history. If it drags past November 5, it’ll take the record outright.

Trade thaw offers a glimmer of relief

After weeks of tension, Presidents Donald Trump and Xi Jinping met in South Korea last week and came away with what markets were hoping for: another pause in the trade war.

Following nearly two hours of talks, Trump said the two sides had reached an understanding: the US would scale back some tariffs on Chinese goods, while Beijing would resume soybean purchases, keep rare earth exports flowing, and step up efforts to curb fentanyl trafficking.

China’s commerce ministry later confirmed both sides had agreed to extend their temporary trade truce for another year, building on progress made in talks between senior officials in Malaysia last week.

Fed treads carefully

The Federal Reserve (Fed) took a cautious step on October 29, cutting interest rates by a quarter point and announcing plans to restart modest Treasury purchases to ease recent money market strains, a sign liquidity has tightened more than policymakers would like.

The 10–2 vote to lower the policy rate to 3.75%–4.00% came as no surprise, while policymakers framed it as insurance against a cooling labour market.

In his press conference, Fed Chair Jerome Powell acknowledged divisions within the Federal Open Market Committee (FOMC), warning investors not to expect another cut in December. Markets now see around 17 basis points of further easing by year-end and roughly 83 basis points by the end of 2026.

ECB content to stay on hold

Across the Atlantic, the European Central Bank (ECB) left rates unchanged at 2% for a third straight meeting and offered little in the way of forward guidance. For now, policymakers seem comfortable with a rare mix of low inflation and steady growth, even as global trade risks linger.

After cutting rates by 2 percentage points in the year to June, the ECB has been in pause mode. With inflation finally back on target, something that’s eluded the Fed, the Bank of England (BoE) and the Bank of Japan (BoJ), there’s little reason to rush into new moves.

At her press conference, ECB President Christine Lagarde noted that some global risks have eased, citing new trade deals and Washington’s tariff rollback following the Trump–Xi meeting. Still, she stressed that uncertainty remains high and that the ECB is in no hurry to change course.

Markets are currently pricing in around 10 basis points of cuts by end-2026, reinforcing the view that the ECB’s easing cycle is likely done for now.