According to a fundamental macroeconomic analysis, the EURUSD outlook for the fourth quarter (Q4) of 2026 appears to be strongly bearish, with sharp monetary divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) as a key driver of this downside.
The US economy has recently proven its exceptional resilience. Stubborn inflation—both headline and core at around 3.7%—fueled by an investment boom in the artificial intelligence (AI) sector and a robust labor market, continues to force the American regulator to tighten monetary conditions. The probability of an interest rate hike at the September 16 meeting is now above 50%. If this scenario materializes, borrowing costs will jump to 4.00%. Such a move is set to reinforce global capital flows into dollar-denominated assets.
There is quite a different picture in Europe. The national central bank seems to be relatively comfortable yet lacking a clear impetus for action. The region’s headline inflation has nearly reached the target level, sitting at 2.2%. The core reading (2.4%) is also approaching the desired figure. Borrowing costs stand at 3.25%, a level that looks fairly hawkish and may weigh on the economy. The ECB has no compelling arguments for raising rates further. Moreover, if the GDP growth in the bloc begins to stall, the regulator will likely be the first of the two to pivot toward monetary easing.
The ratio of core inflation to the interest rate stands at 0.99 in the US, compared to 0.74 in the eurozone. This implies that European policy has already been significantly tighter than its American counterpart. So, the Fed is forced to “play catch-up” with consumer prices by driving up Treasury yields, a move that will trigger a sharp appreciation of the dollar index (DXY).
Rising returns on US government bonds, combined with the resilience of the country’s economy, make the greenback a clear favorite. The outlook for EURUSD is moderately bearish, with the pair potentially falling to 1.0500 by year‑end. The euro could see only a temporary rebound in the event of an unexpected and sharp cooling of the US labor market.
The overall recommendation is to sell EURUSD. Profits should be taken at 1.1470. Stop Loss could be set at 1.1700.
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.
