Trade Setup to Watch: EUR/USD Breaks Ascending Trendline, Further Downside Ahead?

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Most Read: AUD/USD Forecast: Navigating US Government Shutdown & Technical Signals

EUR/USD continued its slide this morning but is trading flat on the day.

Yesterday's daily candle close though has broken a long-tern ascending trendline and sets the pair up for a potential move lower. There is a caveat however, the fundamental picture and technical picture are flashing mixed signals.

EUR/USD Paints a Mixed Picture

EUR/USD seemed poised to test the 1.2000 psychological level heading into the Federal Reserve meeting on September 17. After the meeting the fundamental factors such as monetary policy still seemed to support the idea as well.

Many viewed the Federal Reserve meeting and Fed Chair Powell's speech as dovish in nature. However, the fact that the Fed only saw one rate cut in 2026 and 2027 did signal to me that we could see a bit of a reaction in the US dollar.

Such a reaction did materialize with the US Dollar Index (DXY) rallying in the 3 days after the FOMC meeting. Since then the DXY has continued its impressive rise and this in part is down to the Fed meeting as well as the US Government shutdown. The lack of high impact data from the US has actually benefitted the greenback.

Now the question is will the greenback be able to hold onto its gains once the US government shutdown ends? This question may hold the key to the EUR/USD technical setup below.

Technical Analysis - EUR/USD

From a technical standpoint, EUR/USD has broken the key confluence level which rests around the 1.16300 area.

In doing so the pair saw a daily candle close below the medium-term ascending trendline and hinting at a potential change in trend.

The pair is also on course for a fourth successive day of declines as price is current being held back by the 100-day MA which rests at 1.1633.

The trendline break hints at a move lower toward the 1.14000 handle and potentially a deeper pullback all the way down to 1.1058 handle.

The problem with this setup though is the fundamental picture is at odds with this outlook especially when the US government shutdown ends.

Thus the move may not play out smoothly but there is definitely a potential opportunity to keep an eye on.

The one concern for now is the period-14 RSI which is currently in oversold territory on the daily timeframe. This could lead to a short-term bounce toward the most recent swing high at 1.1740 or potentially the 50-day MA at 1.1691 before continuing on its downward path.

EUR/USD Daily Chart, October 9, 2025

Source: TradingView.com (click to enlarge)

Client Sentiment Data - EUR/USD

Looking at OANDA client sentiment data and market participants are Short on the EUR/USD with 56% of traders Net-Short. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are Short means EUR/USD could rise in the near-term.

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