EUR/USD Sees Decline as US Inflation Data Surprises Markets
EUR/USD dropped almost 0.50% on Wednesday, following stronger-than-anticipated inflation data from the US. This increase in inflation has raised expectations for additional rate hikes from the Federal Reserve (Fed), pushing the US Dollar (USD) to new highs, surpassing 102.50. As of now, the pair is trading around 1.1145, having reached an intraday low of 1.1113—its lowest since May 2025.
The CME FedWatch Tool indicates that market participants are now estimating a 43% likelihood of a rate increase in the Fed’s upcoming meeting on October 27-28, a significant rise from the 22% chance seen prior to the inflation report. Moreover, the probability for a rate hike in December stands at about 95%.
TD Securities commented that “today’s report complicates the Fed’s calculations for October, particularly after recent clear signals suggesting they might pause on rate increases at this meeting.” They also anticipate a “solid 0.36% month-over-month increase for core PCE” and point out that “it seems Fed leadership has opted for a gradual tightening approach, aided by the recent surge in yields that is, in a way, tightening conditions for them.”
With these expectations of further Fed tightening in place, the EUR/USD is likely to face more losses. Additionally, problems in France’s fiscal and political landscape are weighing down the Euro (EUR).
Technical Analysis
From a technical perspective, EUR/USD has been under continuous selling pressure since mid-August, following the failure of buyers to push above the 1.1700 mark. Since then, there has been a sharp downturn, with the pair now trading below crucial Simple Moving Averages (SMAs). The 50-day SMA is at 1.1481, the 100-day SMA at 1.1479, and the 200-day SMA at 1.1588—each well above the current price—indicating a firm downtrend.
The momentum indicators further confirm this bearish stance, with the daily Relative Strength Index (RSI) stuck in oversold territory around 26, while the Moving Average Convergence Divergence (MACD) remains below zero. The Average Directional Index, now rising around 53, suggests a strong and persistent negative trend.
On the upside, immediate resistance is seen at the psychological level of 1.1200, followed by 1.1350. Further resistance zones are indicated by the 100-day SMA at 1.1483 and the 50-day SMA at 1.1489. The 200-day SMA at 1.1591 poses another obstacle before reaching 1.1700.
Conversely, initial support is noted at 1.1150, and a break below this could lead to the 1.1000 psychological barrier.
