The euro is attempting a modest recovery, with EUR/USD rising to 1.1589 and moving back above its short-term moving averages, offering an early signal of returning bullish momentum. And although the pair remains within a broader consolidation range, momentum indicators have begun to improve — raising the prospect that the euro may be preparing for a breakout attempt in the coming days.
Technical outlook: bullish momentum rebuilding gradually
Price action shows a slight but meaningful shift:
The rise above the 15-day moving average at 1.1574 and the 20-day moving average at 1.1561 signals a short-term bullish turn. The flattening of these averages suggests fading downside momentum and the early formation of a higher low. The 14-day RSI stands at 51.07 and has moved back above the 50 neutral line — often an early sign of improving momentum or a potential trend shift. The pair remains range-bound, but the technical bias has tilted in favor of euro bulls for the first time in weeks.
Fundamental backdrop: improved risk appetite supports the euro
Several factors have helped stabilize EUR/USD:
Euro-positive elements include improving global risk sentiment, eurozone data that — despite mixed signals — has not shown further deterioration, and a slightly more optimistic tone from the ECB that has reduced pressure on the currency.
US dollar weakness is also a key driver: the dollar has retreated alongside stabilizing yields, markets believe the Fed has concluded its major tightening phase, and softening US data has reduced the incentive to buy the dollar.
A break above 1.1620–1.1640 would confirm short-term bullish momentum, while a daily close above 1.1700 would lift the pair out of its consolidation structure and signal a broader trend reversal. Conversely, a failure to hold 1.1550 would shift attention back toward 1.1500, the current range floor.
Investor sentiment: shifting toward mild optimism
Retail traders have increased long exposure, institutional positioning has shifted from bearish to neutral, and options markets show a slight improvement in bullish pricing versus last week. Overall sentiment remains balanced — but tilts modestly in favor of buyers.
In short, EUR/USD is showing early signs of a bullish turn, supported by improving technicals and a softer dollar. A breakout has not yet occurred, but upward pressure is building. The bullish scenario opens above 1.1620, targeting 1.1700, while a break below 1.1550 refocuses attention on 1.1500. For now, the euro is stable and gradually rebuilding momentum.
Data
A series of data released Friday indicates that eurozone inflation continues to follow a reassuring trajectory, supporting economists’ expectations that it will remain close to target in the coming years — reducing the need for further rate cuts by the European Central Bank.
Inflation has hovered around the ECB’s 2% target for most of this year, and policymakers expect it to remain near this level in the medium term — a rare success for a central bank that struggled with extremely low inflation for a decade before it surged above 10% after the pandemic.
French inflation remained steady at 0.8% this month, eased slightly to 3.1% in Spain, and was broadly unchanged across several major German states — keeping the aggregate eurozone reading, due Tuesday, on track to hold near 2.1%.
No additional rate cuts expected
An ECB survey last month showed consumers expect inflation at 2.8% next year, up from 2.7% a month earlier, while three-year expectations stayed at 2.5%, and five-year expectations at 2.2%.
The survey — covering 19,000 adults in 11 eurozone countries — supports policymakers’ view that inflation has become anchored near target and is likely to stay there in the coming years, even if short-term fluctuations occur.
For this reason, financial markets see virtually no chance of a rate cut next month and assign only about a one-in-three probability to any further easing next year. Most economists believe the rate-cutting cycle has reached its floor.
Rate-cut debate continues
Still, the internal ECB debate on rate cuts is unlikely to fade soon. Lower energy prices could push inflation below target in 2026, and some policymakers worry that persistently low readings may drag expectations lower and entrench weak inflation.
However, the ECB typically looks past volatility caused by energy prices and focuses on the medium-term outlook. Chief economist Philip Lane warned that underlying price pressures excluding energy remain too high.
Lane also said that domestic inflation is set to moderate and pointed to the ECB’s income and spending survey, which showed consumer expectations for income growth rising to 1.2% from 1.1%, while expectations for spending growth remained at 3.5%.
Although the ECB is keeping the door open to further rate cuts, it has made clear it is in no hurry to adjust policy. Some policymakers argue the bank may have already completed its easing cycle after cutting the deposit rate in half over the past year through June.
