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They key factor dominating the Forex market now is the strong US Dollar, bolstered by rising treasury yields which a few days ago reached the highest level seen in almost twenty years. The US Dollar has made gains recently almost everywhere, and technically, the greenback is on the verge of major breakouts against the certain European currencies such as the Euro and the British Pound. The key question facing traders in the EUR/USD currency pair now is whether this breakout will happen, or whether we will get a reversal sooner or later.
EUR/USD Fundamental/Sentimental Analysis
This is driven much more by the US Dollar than the Euro, and this is quite typical for the Forex market, which sees about 75% of its volume from exchanges involving the greenback. The US Dollar is a bit off its two month high but is deriving strength from its long-term treasury yields trading near its nineteen-year high, while markets are expecting an even stronger chance of a rate hike at the next Fed meeting - CME FedWatch tool now shows the market pricing in a 70% probability of the Fed making a further 0.25% rate hike at its next meeting in October, up from 53% just a couple of weeks ago. The US Dollar is probably also getting a boost from Trump’s policies which are designed to such money into the USA and its capital market, which is creating a demand for Dollars. Economic growth in the USA is not especially impressive, but it remains relatively strong, and inflation is lower than in most other OECD economies.
The Euro’s fundamentals are mixed: the ECB raised its deposit rate to 2.50% in September, which lends the currency some support, and it expects the Eurozone economy to remain resilient. But growth is still modest—forecast at 0.9% for 2026—while inflation is projected at 3.0%, leaving the region exposed to high energy costs and further price pressure. Overall, tighter policy supports the Euro, but the growth outlook limits the case for a strongly bullish view.
EUR/USD Technical Analysis
The price action over the past few days shows that there are signs of a bullish base following a strongly bearish period lasting about two weeks. We are seeing initial signs in the hourly price chart of a bullish head and shoulders chart pattern emerging, with a baseline support at 1.1375. The problem is that there is no discernable neckline. The best I can say is, if the price gets established below 1.1375, that will be a bearish sign that traders can feel justified acting upon to go short.
A key test for bulls will be whether 1.1406 can be overcome, as this looks to be the strongest resistance level nearby. It is also confluent with the round number at 1.1400.
This currency pair is clearly in a long-term bearish trend, so a short is likely to have a tailwind while a long trade would not.
(image28092026eurusd) image here
My Take on EUR/USD
I see a move lower as the more likely outcome, and certainly the more tradable outcome. Trend following funds and institutions will be going short if we get a daily close today below 1.1375 so if you do the same thing, you will have some elephants on your side. I think it makes sense to wait for the price to get out of this range between 1.1406 and 1.1375 before doing anything unless you are a very skilled trader who believes the US Dollar is due a pullback. If so, you might want to try a long scalp from 1.1375 if we get a bounce there, managing the trade very carefully and hoping it can turn into a swing trade while you at least avoid a loss.
Review, Support & Resistance Levels
In my previous EUR/USD signal on 17th September no trades were triggered.
Risk 0.75%.
Trades may only be taken prior to 5pm London time today.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1487, $1.1525, or $1.1563.
Put the stop loss 1 pip above the local swing high.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1389, 1.1406, or $1.1431.
Put the stop loss 1 pip below the local swing low.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the USD.
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