EUR/USD slipped again on Thursday, extending Wednesday’s post-Federal Open Market Committee (FOMC) decline and touching levels not seen since early August, in the 1.1550–1.1540 range.
The move came as the US Dollar (USD) roared back to life, with the US Dollar Index (DXY) climbing to multi-week highs near 99.70 and edging closer to the psychological 100.00 mark. US Treasury yields also pushed higher across maturities, reinforcing the Greenback’s rebound and keeping the pressure firmly on the Euro and the rest of the risk-associated universe.
Washington standoff deepens
The government shutdown in Washington is starting to take a toll. Nearly a month in, lawmakers are still at an impasse. On Tuesday, Senate Democrats blocked a short-term Republican funding proposal, with the 54–45 vote falling short of the 60 needed to keep the government open through late November.
The economic fallout is mounting. Hundreds of thousands of federal workers remain unpaid, public services are slowing, and business sentiment is beginning to slip. Early signs of strain are already visible in hiring and GDP data, both flashing mild warning signals.
At 30 days and counting, this is now the second-longest shutdown in US history. If it drags on beyond November 5, it’ll set a new record outright.
Trade truce brings a sigh of relief
After weeks of tension, US President Donald Trump and China’s Xi Jinping wrapped up a closely watched meeting in South Korea, and, as many expected, it ended in a truce.
Following nearly two hours of talks, Trump said the two sides had reached an understanding: the US would ease some tariffs on Chinese imports, while Beijing would resume purchases of American soybeans, maintain rare earth exports, and ramp up efforts to curb fentanyl trafficking.
China’s commerce ministry later confirmed both countries had agreed to extend their temporary trade truce for another year, building on progress made during earlier discussions between senior officials in Malaysia.
The Fed plays it safe
A divided Federal Reserve (Fed) delivered a quarter-point rate cut on Wednesday and said it would restart modest Treasury purchases to smooth out recent money market tensions, a sign that liquidity has tightened more than policymakers would like.
The decision, passed by a 10–2 vote, lowers the policy rate to 3.75%–4.00% and was widely expected. Officials framed the move as insurance against a cooling labour market.
In his press conference, Fed Chair Jerome Powell acknowledged that the Federal Open Market Committee remains split on next steps. He cautioned markets not to expect another rate cut in December, reflecting the uncertainty hanging over the board.
Following the decision, markets now price nearly 18 basis points of additional easing by year-end and just over 82 basis points by the end of 2026.
ECB stays in wait-and-see mode
Across the Atlantic, the European Central Bank (ECB) held interest rates steady at 2% for a third consecutive meeting and avoided giving any hints about future moves. For now, policymakers seem content to enjoy a rare moment of low inflation and steady growth, even as global trade remains unpredictable.
The ECB had cut rates by a full 2 percentage points in the year to June and has since paused. With inflation now right on target, a balance that’s proved elusive for the Fed, the Bank of England (BoE) and the Bank of Japan (BoJ), there’s little urgency to act.
At her press conference, ECB President Christine Lagarde said that some global risks have eased, helped by new trade deals. She pointed to Washington’s decision to reduce tariffs on Chinese goods following the Trump–Xi meeting as a welcome development. But she also stressed that plenty of uncertainty still clouds the global outlook, all meaning the ECB won’t be rushing to change course.
Markets are currently pricing in roughly 10 basis points of cuts by the end of 2026, reinforcing the idea that the ECB’s easing phase is likely done for now.
Tech corner
Despite the resurgence of a strong selling bias in the last couple of days, EUR/USD keeps its rangebound theme well in place for the time being.
Southwards, the next support comes at the October floor at 1.1542 (October 9, 14), followed by the August low at 1.1391 (August 1). Once cleared, spot could embark on a potential journey toward the significant 200-day SMA at 1.1311, prior to the weekly trough at 1.1210 (May 29).
In contrast, there is a minor resistance at the weekly peak at 1.1728 (October 17), closely followed by the October high at 1.1778 (October 1). North from here emerges the 2025 ceiling of 1.1918 (September 17), while the breakout above that region exposes the 1.2000 milestone.
While above the critical 200-day SMA, the pair’s outlook is expected to remain positive.
Momentum indicators seem to signal extra losses ahead: the Relative Strength Index (RSI) deflates to nearly 40, showing renewed downside pressure, while the Average Directional Index (ADX) near 15 indicates that the current trend remains pale.
EUR/USD daily chart
Near-term outlook
EUR/USD remains stuck in its range, searching for direction. Whether it’s a dovish pivot from the Fed, fading appetite for US assets, a cautious-for-longer ECB, or fresh progress on trade, the pair is still waiting for a clear catalyst to break free.
