Euro Under Pressure as Dollar Strengthens on Fed Signals

Key Moments

EUR/USD stabilized around 1.1792 after a sharp decline driven by stronger US data and hawkish Federal Reserve signals.
Markets still anticipate two 25-basis-point Fed rate cuts this year, though expectations for policy easing have been pared back.
Technical indicators point to a short-term corrective bounce within a broader bearish trend, with key support at 1.1765 and resistance at 1.1885.

Macro Backdrop Supports a Stronger Dollar

EUR/USD on Thursday hovered near 1.1792, consolidating after a steep drop the previous day. The US dollar remained underpinned by firm US macroeconomic data and unexpectedly hawkish signals from the Federal Reserve.

Minutes from the latest Fed meeting revealed ongoing internal divisions over the future trajectory of interest rates. The document indicated that securing approval for a rate cut may prove challenging for the new chair. Some policymakers had previously openly acknowledged that a rate increase was possible if inflation stayed above target.

As a result, markets have dialed back expectations for aggressive policy easing this year, although pricing still reflects two 25-basis-point rate cuts before year-end.

Economic Data Flow Reinforces Dollar Bid

The dollar received further backing from a strong set of economic indicators. Industrial production expanded at its fastest pace in almost a year. Orders for core capital goods outperformed forecasts, and the volume of new home mortgages climbed to a five-month high.

Traders are now turning their attention to upcoming PMI readings and GDP data, which are expected to provide additional clarity on the likely path of US interest rates.

EUR/USD Technical Picture: Bearish Bias Intact

On the H4 chart, EUR/USD is trading just above the 1.1790-1.1800 area after breaking below support at 1.1885, which triggered an acceleration of the decline. The pair is holding under the midline of the Bollinger Bands, while the bands themselves have widened, signaling strong bearish momentum.

The MACD indicator is in negative territory, and its histogram is extending lower, underscoring the prevailing downside pressure. The Stochastic oscillator has bounced out of oversold levels, hinting at the possibility of a short-lived corrective move, though the overall structure remains fragile. Immediate support is located at 1.1765, with resistance defined at 1.1885.

On the H1 time frame, the chart shows a pronounced downward leg followed by a phase of local stabilization. The pair is attempting a modest rebound from the 1.1780 region but is still trading beneath the Bollinger Bands’ middle line. The MACD remains negative, although selling pressure is gradually easing. The Stochastic oscillator is currently in overbought territory, indicating that any corrective rally may stall in the 1.1820-1.1840 zone.

Level / Indicator	H4 Time Frame	H1 Time Frame
Current price area	1.1790-1.1800	Rebound from 1.1780
Key support	1.1765	1.1765
Key resistance	1.1885	1.1820-1.1840 (correction cap)
Bollinger Bands	Price below midline; bands widened	Price below midline
MACD	Negative; deepening histogram	Negative; pressure easing
Stochastic	Rebound from oversold	Overbought

Outlook: Corrective Bounce Within a Downtrend

The overall configuration suggests that EUR/USD is undergoing a short-term rebound embedded within a broader bearish phase. The pair remains under notable pressure following hawkish Fed communications and resilient US data.

The break below key technical support has confirmed a downside shift, with momentum gauges still favoring further weakness despite recent oversold readings. The current consolidation appears corrective rather than a change in trend, with any recovery likely constrained around the 1.1820-1.1840 band.

Forthcoming US PMI and GDP releases are expected to be pivotal for short-term direction. A decisive move below 1.1765 would pave the way for an extension of losses towards 1.1700, while only a sustained rise above 1.1885 would meaningfully ease the prevailing bearish pressure.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.