EUR/USD. Analysis and Forecast

[Ben Graham]

The EUR/USD pair failed to capitalize on the positive momentum from yesterday's rebound off the psychological 1.1800 level — a one-and-a-half-week low — and is holding within a narrow range. Market participants appear to be awaiting the release of the FOMC meeting minutes to gain clarity on the Federal Reserve's interest rate cut plans and are refraining from taking active positions.

The U.S. central bank's monetary strategy will have a decisive impact on the trajectory of the U.S. dollar and determine the direction of EUR/USD. At the same time, expectations of a Fed rate cut in June and at least two more such moves in 2026 continue to gradually undermine the dollar's position.

Adding to this are concerns about the Federal Reserve's independence and signs of progress in U.S.–Iran negotiations, which limit the upward potential of the American currency. Iranian Foreign Minister Abbas Araghchi told the press that consensus had been reached on key principles for resolving the prolonged nuclear conflict. Such news eases geopolitical tensions, strengthens investor risk appetite, and triggers capital outflows from safe-haven assets, forcing U.S. dollar bulls onto the defensive.

Nevertheless, the euro is struggling to find support among major buyers due to growing expectations of a rate cut by the European Central Bank, compounded by weakness in the eurozone economy. In particular, the ZEW survey released on Tuesday in Germany showed a decline in institutional investor sentiment regarding the region's largest economy, falling to 58.3 in February from 59.6 the previous month. Meanwhile, the overall eurozone economic sentiment index unexpectedly dropped to 39.4 in February from 40.8 previously.

From a technical perspective, the Relative Strength Index, although still in positive territory, is nearly neutral and trending downward. This indicates weakness among the bulls. If the pair fails to hold the psychological 1.1800 level, the decline could accelerate toward the February low near the 50-day SMA. Should the bulls somehow manage to push the pair back above the 20-day SMA, it would target the psychological 1.1900 level and the February high, with resistance around 1.1890 along the way.

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