EUR/USD Forecast: ECB Hike Signals Put 1.1280 in Focus

The euro is drawing support from signals that the European Central Bank (ECB) could tighten monetary policy further. In his November 3 speech, Bundesbank President Joachim Nagel indicated that a December rate increase would probably be necessary unless the inflation outlook improved significantly. Such a move would represent the third increase this year. He warned that repeated energy price shocks could spread to other goods and services and eventually influence wage demands, although evidence of these second-round effects remained limited. The decision will take account of updated Eurosystem staff projections extending through 2029. Meanwhile, the October flash inflation estimate released on November 4 showed annual eurozone inflation rising from 3.8% to 4.0%, while core inflation remained unchanged at 2.5%.

The US dollar has softened, with the US Dollar Index (USDX) near 101.10 in the original market snapshot, as investors assess results from the November 3 congressional elections. Early reporting pointed to Democratic gains, including Senate victories in North Carolina and South Carolina. The implications for fiscal policy, trade measures and the administration’s legislative agenda remain important for market sentiment. However, the election results alone do not establish that investors are broadly moving funds from dollar holdings into Treasury securities. Relative interest rate expectations also remain central to the pair’s outlook, as discussed in our previous EUR/USD forecast.

Support and Resistance Levels

On the daily chart, the pair is testing the lower boundary of the broader descending channel with approximate boundaries at 1.1600–1.1240. A sustained recovery above this boundary would improve the prospects for a return into the channel.

Technical indicators suggest that the sell signal is weakening: the fast exponential moving averages (EMAs) of the Alligator indicator remain below the slow ones, but the spread is narrowing, while the Awesome Oscillator (AO) histogram is forming corrective bars in negative territory.

Support levels: 1.1190, 1.1050.

Resistance levels: 1.1280, 1.1420.

EUR/USD Trading Scenarios and Exchange Rate Forecast

Long positions may be opened after the price rises and consolidates above 1.1280, with a target at 1.1420. Stop-loss: 1.1200. Estimated holding period: 7 days or more. Short positions may be opened after the price declines and consolidates below 1.1190, with a target at 1.1050. Stop-loss: 1.1280.