EURUSD downtrend may be broken above 1.164

EURUSD has been trading lower since mid-September, with several unsuccessful attempts to reverse the downtrend. The most recent wave of growth pushed prices to the 38.2% Fibonacci retracement (1.164), but the pair failed to consolidate in this area and resumed its decline. However, the pullback did not breach the lows near 1.147, signaling potential strength for another attempt to retest the 1.164 resistance. If bulls hit the target, EURUSD may climb to the 50% Fibonacci retracement (1.169).

Yesterday's steady advance resulted in a crossover of the Stochastic lines near oversold territory. This signal increases the probability of a more sustained upward reversal. The viability of this scenario also depends on the pair's ability to break through the 50-day moving average line, especially after three unsuccessful attempts over the past month. Given the current technical setup, opening long positions remains a good option until the price drops to 1.151.

Fundamentally, the dollar's weakness was triggered by disappointing US retail sales statistics for September. The report showed a mere 0.2% gain, missing expectations and falling below previous figures. These data further weighed on consumer confidence, which has been fragile since hitting a historical low back in April. This has dramatically changed market forecasts, which now put the probability of a rate cut by the Federal Reserve (Fed) on December 10 at over 80%.

In a new report, Morgan Stanley analysts set a target for EURUSD at 1.23 by the end of spring 2026. They anticipate the Fed will ease monetary policy three more times in the first half of next year, while the European Central Bank (ECB) will keep borrowing costs unchanged. Deutsche Bank experts set an even more ambitious target of 1.25 for 2026. They cite the US budget and trade deficits as key reasons for a weaker dollar, noting that the Trump administration is unlikely to succeed in significantly reducing them.

Consider the following trading strategy:

Buy EURUSD at the current price. Take profit 1: 1.164. Take profit 2: 1.169. Stop loss: 1.151.