EUR/USD Holds Below 1.1600 as Dollar Strength Reigns

Market Overview

The EUR/USD pair remains under bearish pressure, trading around 1.1622 after last week’s decline to 1.1542, near a two-month low. Renewed investor confidence in the U.S. dollar as a safe-haven asset followed former President Donald Trump’s announcement of harsh tariffs on China, while the ongoing U.S. government shutdown now in its third week added further uncertainty to global markets.

With U.S. markets closed for a holiday, volatility is expected to remain subdued, and the pair is likely to trade within a narrow, downward-biased range around the 1.1600 support zone.

Technical Analysis

From a technical standpoint, the EUR/USD remains in a bearish trend, according to the daily chart.

• The 14-day RSI stands at 37, well below the neutral 50 mark, confirming bearish momentum.

• The MACD indicator continues to point downward, signalling sustained selling pressure.

• A rebound in bullish sentiment would require the pair to reclaim and stabilize above the 1.1800 resistance level.

If the pair fails to hold above 1.1570, further declines toward 1.1500 and 1.1430 could be expected.

Support Levels: 1.1570 / 1.1500 / 1.1430
Resistance Levels: 1.1670 / 1.1750 / 1.1820

Trading Signals

• Buy Setup: Buy EUR/USD near 1.1490, targeting 1.1730, with a stop loss at 1.1400.

• Sell Setup: Sell EUR/USD near 1.1730, targeting 1.1500, with a stop loss at 1.1800.

Trading Bias: Bearish
Given today’s market conditions, traders are advised to avoid aggressive entries and wait for confirmation near stronger support levels. Limited price movements may persist due to the U.S. holiday, but downside risks remain dominant.

Medium- to Long-Term Outlook

According to analysts at Danske Bank, the euro remains under pressure amid renewed concerns surrounding the French political crisis and broader eurozone instability. The bank maintains a neutral short-term outlook on the U.S. dollar but expects gradual dollar weakness in the medium term as interest rate differentials begin to narrow.

Danske forecasts multiple Fed rate cuts in October, January, April, and July which could eventually support a rebound in EUR/USD toward 1.23 within 12 months. However, structural shifts, such as declining institutional demand for U.S. assets and reduced global dollar transaction share, may continue to weigh on the greenback.

Despite these shifts, the dollar’s reserve currency status remains secure, limiting the scope for a sharp long-term decline.

Conclusion

The EUR/USD pair remains locked in a bearish short-term structure, with sentiment favouring the U.S. dollar amid geopolitical and policy uncertainties. However, the medium-term outlook suggests potential for recovery once U.S. monetary easing gains traction and global risk appetite improves. For now, traders should monitor 1.1570–1.1500 as the key support zone, while any move above 1.1750 may signal the start of a corrective rebound.