EUR/USD Price Forecast: $1.20 Slips as ECB Cut Bets Grow Before Fed Decision
EUR/USD slipped during the European session, trading near $1.198 to $1.199, as the euro faced growing pressure...
Quick overview
- EUR/USD has slipped to around $1.198 to $1.199 due to changing expectations for European Central Bank policy.
- Market sentiment shifted as the probability of a July ECB rate cut increased from 15% to 25%, cooling euro momentum.
- The dollar remains steady despite weak US data, with traders cautious ahead of the Federal Reserve's decision.
- Technically, the recent drop in EUR/USD appears to be a pullback rather than a full reversal, with key support levels identified.
EUR/USD slipped during the European session, trading near $1.198 to $1.199, as the euro faced growing pressure. This move was driven not by major news, but by changing expectations for European Central Bank policy. ECB Governing Council member Martin Kocher said rate cuts might be possible as soon as July if a stronger euro starts to affect inflation.
Markets reacted quickly. According to Reuters, eurozone money markets lifted the probability of a July ECB cut to around 25%, up from roughly 15% previously. That repricing was enough to cool euro momentum, especially after last week’s rally pushed EUR/USD briefly above the $1.20 handle.
This isn’t panic selling. It’s recalibration. Traders are reassessing how much policy support the euro can realistically expect in the second half of the year.
Dollar Steady Despite Weak Data and Political Noise
On the US side, the dollar has found short-term stability even as the macro picture looks uneven. Earlier gains in EUR/USD followed comments from President Donald Trump, who said the dollar’s value “is great,” prompting a wave of greenback selling. That move has since faded.
Now, the focus is on the Federal Reserve, which is expected to keep rates steady at 3.50% to 3.75%. Recent US data has been soft, but not weak enough to make the Fed change its stance.
Several factors are affecting market sentiment:
- US Consumer Confidence falling to 84.5, the lowest in over 11 years
- ADP employment growth slowing for a third straight week
- Ongoing concerns over political pressure on the Fed’s independence
For now, uncertainty is supporting the dollar, as traders reduce risk ahead of the Fed decision rather than chase directional bets.
EUR/USD Technical Picture: Pullback, Not Breakdown]
Technically, EUR/USD’s recent drop seems more like a pause than a full reversal. On the 2-hour chart, the price is holding near $1.1960, just under the recent high of $1.2040 to $1.2050.
The pullback is respecting key Fibonacci levels:
- 50% retracement: $1.1966 (initial support)
- 61.8% retracement: $1.1939 (deeper support zone)
Candlestick patterns show small real bodies and little follow-through, which suggests traders are taking profits rather than selling aggressively. The rising trendline from the $1.1850 base is still in place, and an RSI near 60 points to consolidation after recent strength, not the end of the trend.
If EUR/USD reclaims $1.1995, upside opens toward $1.2030 and $1.2080. A sustained break below $1.1935 would weaken the bullish structure and shift focus lower.
Trade idea: Consider buying on pullbacks above $1.1940, aiming for $1.2030 to $1.2080. The idea is invalid if the price drops below $1.1900.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
- Read our latest reviews on: Avatrade, Exness, HFM and XM
Save