The technical setup for EURUSD is now clearly bearish. Following its recent advance, the pair is currently forming a corrective pattern, with a potential downside target at the 1.1760 level. However, the overall market sentiment remains mixed, as several bullish factors are still in play.
Key tailwinds for the euro:
ECB’s hawkish rhetoric. European Central Bank officials are expected to maintain interest rates at current levels (2.00%) till the end of 2026, curbing stubborn inflation and supporting the euro. Bundesbank President Joachim Nagel is one of the staunchest advocates for this aggressive approach.
Favorable fundamentals. Unlike the US, the eurozone has a current account surplus, which gives the single currency a structural advantage over the greenback.
Key tailwinds for the dollar:
Monetary policy divergence. The Federal Reserve (Fed) holds rates in the 3.50–3.75% range, significantly higher than the ECB. This fact certainly plays in the USD’s favor.
Strong macroeconomic data. Robust US statistics—the labor market report in particular—may continue to underpin the greenback, encouraging the Fed to maintain a restrictive stance and dampening expectations for near-term rate cuts.
Political risks. A tense global environment and permanent uncertainty in the US could rock the boat and briefly boost demand for the dollar as a safe-haven asset.
Regarding the medium-term outlook for EURUSD, major financial institutions provide the following forecasts:
Wells Fargo expects the pair to stick around the 1.18 level in the first half of 2026 before peaking at 1.19 by June and declining to 1.17 closer to the year-end.
ING and MUFG experts project that EURUSD may rise to 1.21 (or even 1.24) by December, assuming that the greenback weakens due to anticipated Fed rate cuts.
Traders Union sees an average level for 2026 at 1.2486, with the potential year-end rally toward 1.3095.
The overall recommendation is to sell EURUSD in the short term. Profits should be taken at 1.1760. Stop Loss could be set at 1.1930.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
