EUR/USD Forecast: Euro Near 1.1120 Ahead of Fed and ECB Decisions

The euro's weakness is largely linked to concerns about a deepening political and debt crisis in France. Although the country avoided a sovereign rating downgrade by Moody's, pressure on its government bonds has pushed the risk premium over German debt to its highest level since 2011. French bond market tensions add to the challenges facing the European Central Bank (ECB), which may leave its deposit facility rate unchanged at 2.50% at its October 29 meeting. Investors will look for signals about whether further tightening could follow in December, although the ECB has not committed to a particular rate path. A December increase also remains a possibility for the Federal Reserve, leaving the interest rate differential between the euro area and the United States in focus. The euro's broader economic headwinds were discussed in our previous EUR/USD forecast.

The US dollar remains supported, with the US Dollar Index (USDX) near 102.20 following gains in the previous session amid stronger-than-expected economic data. The Federal Reserve will announce its policy decision on October 28 at 20:00 (GMT+2), followed by the press conference at 20:30. Policymakers are widely expected to leave the federal funds target range unchanged, an outcome already largely reflected in market expectations. Meanwhile, the Conference Board's October consumer confidence report showed that its headline index rose from an upwardly revised 84.2 to 91.7, exceeding forecasts of 81.2. Consumers' assessments of both current conditions and the outlook improved. The stronger reading does not remove inflation concerns or rule out further tightening, so investors will closely examine the Fed's assessment of the economy and its guidance on subsequent decisions.

Support and Resistance Levels

On the daily chart, the pair remains below the support line of a broader descending channel with boundaries at 1.1210 and 1.1620.

Technical indicators are strengthening their sell signal: the Alligator indicator's faster moving averages remain below its slower lines, maintaining a stable spread, while the Awesome Oscillator (AO) histogram is forming corrective bars in negative territory.

Support levels: 1.1090, 1.0900.

Resistance levels: 1.1180, 1.1360.

Trading Scenarios and EUR/USD Forecast

Short positions may be considered after the price breaks and holds below 1.1090, targeting 1.0900. Stop Loss: 1.1200. Expected holding period: 7 days or longer.

Long positions may be considered after the price breaks and holds above 1.1180, targeting 1.1360. Stop Loss: 1.1100.