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The euro's selloff against the dollar has eased at a well-defined support line, opening the door to a recovery this week, but Pound Sterling Live sees any gains as temporary.
The Euro to Dollar exchange rate opens the week at 1.1209 after twice holding the 1.1113 support line in October, and we look for a recovery in the coming days should the U.S. calendar allow it.
Pound Sterling Live's stance is that any recovery will be tactical in nature, and that the euro is likely to stay under pressure against the dollar over the medium term.
From a technical perspective, the 1.1113 support line, shown in orange on the chart, has halted the euro's decline twice this month, while the RSI in the lower panel has climbed out of oversold territory:
EUR/USD daily chart. Image © Pound Sterling Live, chart created with TradingView.
The pair first found a floor at 1.1113 on 14 October, then returned to it last week and dipped only briefly beneath it on Thursday before recovering, a sign that buyers are defending the level.
The RSI has risen to 45 from below 30 in early October, which tells us the selling pressure behind the September slide has eased and leaves room for a recovery before conditions become stretched again.
The first objective for a recovery is the 16 October high at 1.1269, which Jeremy Stretch at CIBC Capital Markets says the pair must clear on a closing basis to halt its slide towards the May 2025 low at 1.1065.
We look for EUR/USD to recover towards 1.1269 this week, with the 1.1113 line underpinning the pair. A daily close beneath 1.1113 would change Pound Sterling Live's near-term Euro to Dollar forecast and open the way to fresh 2026 lows.
On a medium-term view the signals remain bearish, with the 100-day moving average, the blue line, falling since August and sitting at 1.1428, well above the market, so any recovery that falls short of it would leave the broader downtrend intact.
A week ago Pound Sterling Live called for a move back towards 1.1150 and a retest of 1.1113, and the pair delivered both, reaching 1.1113 on Wednesday and dipping to 1.1105 on Thursday.
Dollar Weakness Flatters the Euro
The U.S. dollar is expected to be the dominant driver of EUR/USD this week, and it was widespread dollar weakness that allowed the pair to stabilise above 1.1113 in the first place.
The dollar lost ground last week as markets scaled back their Fed expectations, and EUR/USD rose from a fresh 2026 low just above 1.11 to 1.1163 on Thursday as softer U.S. inflation detail and an Alphabet-led selloff in technology stocks pulled Treasury yields lower, as Pound Sterling Live reported.
Should the dollar start rising again, the euro looks to be a particularly vulnerable counterpart, with France's fiscal troubles and high gas prices leaving it with few sources of support of its own.
Friday's jobs report is the dollar's main test. Economists expect the U.S. economy to have added 55,000 jobs in October, with the payrolls figures due at 13:30 alongside an unemployment rate seen steady at 4.2% and monthly wage growth of 0.3%. A print above consensus would lift the dollar and weigh on EUR/USD, while a miss would extend the dollar's retreat and support the pair.
The U.S. midterm elections on Tuesday are unlikely to move the dollar for long, with Julius Baer expecting "substantial political news flow but only a limited market impact."
Earlier in the week, U.S. business surveys from the ISM and job openings data are second-tier releases that should only move the dollar at the margin.
Eurozone Inflation Will Test the ECB's December Plans
Eurozone price data for October arrive on Wednesday at 10:00, where economists see annual inflation edging up to 3.9% from September's 3.8%, with the core rate unchanged at 2.5%. An upside surprise would strengthen the case for a December ECB hike and support the euro, while a miss would weigh on it.
The ECB held its deposit rate at 2.50% last week, and "with today's comments, another rate hike at the ECB's December meeting is clearly in the offing," says Carsten Brzeski, Global Head of Macro at ING.
President Christine Lagarde also confirmed she will step down on 7 February 2027, a change that Holger Schmieding, Chief Economist at Berenberg, says "does not change the outlook for ECB policies."
Euro-dollar's Respite a Tactical Opportunity
The euro would struggle to build on any recovery while France's fiscal troubles, high gas prices and a hawkish Fed remain in the background, and strategists at several banks advise selling into strength.
CIBC Capital Markets keeps "an immediate bias to fade EUR rallies" given growth concerns, high gas prices and elections in Spain and France, while a rebound "is likely to remain difficult to sustain, even if key support levels continue to hold," says George Vessey, Lead FX and Macro Strategist at Convera.
The euro's recovery case rests on positioning, with the single currency "deeply oversold" and able to "find its footing should the 'US exceptionalism' trade that has dominated in recent months begin to fade," says Karl Schamotta, Chief Market Strategist at Corpay.
With the 1.1113 line holding and the dollar losing some of its rate support, Pound Sterling Live's Euro to Dollar forecast looks for a tactical recovery towards 1.1269 this week, inside a medium-term trend that continues to favour the dollar.
