EUR/USD Forecast: Market Awaits Fed Meeting Minutes, Dollar Holds the Upper Hand
2026-07-07 20:17:33
On Tuesday (July 7), the euro fell from its intraday high, rebounded after hitting a low, and then plunged again. The current price is 1.1432. The short-term RSI is also weakening, indicating that the bullish momentum is waning.
Ahead of the release of the Federal Open Market Committee (FOMC) meeting minutes, the dollar received slight support, while the euro remained under pressure against the dollar; stronger oil prices and increased volatility in technology stocks boosted market demand for the safe-haven dollar; a significant rebound in German industrial output failed to provide an effective boost to the euro.
Trading was generally quiet at the start of the week, with continued buying interest flowing into the US dollar, suggesting a slightly bearish outlook for the euro against the dollar. Currently, the market lacks new economic data to drive price movements, and investors are focusing on policy expectations from the two major central banks, international oil prices, volatility in the technology sector, and overall market risk sentiment. While the euro has held above the 1.1400 level, it has struggled to generate significant upward momentum, and market funds are gradually shifting towards the US dollar.
The market has entered a wait-and-see phase.
Following last week's release of US employment data, the foreign exchange market entered a period of range-bound consolidation. Although the non-farm payrolls figure fell short of market expectations, it did not significantly alter market predictions regarding the Federal Reserve's monetary policy. Investors currently tend to hold long positions in the US dollar, awaiting clearer policy signals from Fed officials.
The U.S. ISM Services Purchasing Managers' Index (PMI) released on Monday came in at 54.0, largely in line with market expectations, confirming that the U.S. economy is maintaining a steady pace of expansion and that there is no risk of a new round of rising inflation. Meanwhile, Federal Reserve Governor Christopher Waller reiterated his consistent stance: upside risks to inflation have not subsided, and questioned whether excessive forward guidance is truly beneficial to the market.
Today's US economic data schedule is sparsely packed with major indicators, and market focus has already shifted to the FOMC meeting minutes due on Wednesday. If the minutes signal that officials are inclined to tighten monetary policy in the coming months, the US dollar will continue to receive support.
Leaving aside economic fundamentals, the trend of crude oil prices deserves close attention. Affected by the continued geopolitical tensions in the Strait of Hormuz (news surrounding missile attacks on multiple merchant ships), international oil prices have rebounded for four consecutive days. Although current oil prices have fallen significantly from the highs driven by geopolitical conflicts, continued market concerns about crude oil supply shortages have kept prices stable around the $70 mark, indirectly increasing the safe-haven appeal of the US dollar.
The euro lacks new positive drivers and its performance remains weak.
The outlook for the euro is mixed. German industrial production data released today for May unexpectedly improved, rising 0.9% month-on-month, with significant rebounds in automobile manufacturing and construction output. This strong data indicates that the European industrial sector's ability to withstand the impact of recent geopolitical conflicts far exceeds previous pessimistic market expectations.
However, the recovery in industrial data alone is insufficient to completely reverse market expectations regarding the European Central Bank's monetary policy. The market is still debating whether the ECB will need to raise interest rates further this year, and a September rate hike is no longer considered the most probable event.
However, ECB officials are unlikely to declare victory in the inflation war in the short term. Core inflationary pressures remain high, and the central bank's overall policy stance will remain cautious. Several senior ECB officials will speak this week, and they are likely to reiterate that the fight against inflation is not yet complete. While this rhetoric may provide some temporary support for the euro, it is unlikely to counteract the current comprehensive strengthening of the US dollar.
EUR/USD Technical Analysis: The market may continue to trade within a range.
(EUR/USD daily chart source: FX678)
From a technical analysis perspective, the euro/dollar pair is likely to maintain a sideways trading pattern in the short term. The pair is currently trading above the 1.1410 support level; if this support is breached, the price may test the 1.1300 level.
On the upside resistance side, the 1.1450–1.1470 range is a key resistance zone for the euro against the US dollar; after breaking through this range, the next level to watch is the psychological level of 1.1500, and then 1.1575.
For the euro to experience a substantial short-term rally against the dollar, two key preconditions need to be met: a significant market correction of expectations for a Federal Reserve rate cut, or a marked weakening of US economic data. However, neither of these scenarios is likely to materialize in the short term. Therefore, with market volatility remaining low, funds continue to chase the dollar's relatively higher yield advantage.
Overall, the euro/dollar pair remains slightly bullish for the dollar in the short term. Unless the upcoming FOMC meeting minutes release unexpectedly dovish signals or ECB officials make hawkish comments on interest rate hikes, the pair will likely continue to trade near the lower end of its recent trading range; any short-term price rebound is highly likely to attract short sellers.
Ahead of the release of the Federal Open Market Committee (FOMC) meeting minutes, the dollar received slight support, while the euro remained under pressure against the dollar; stronger oil prices and increased volatility in technology stocks boosted market demand for the safe-haven dollar; a significant rebound in German industrial output failed to provide an effective boost to the euro.
Trading was generally quiet at the start of the week, with continued buying interest flowing into the US dollar, suggesting a slightly bearish outlook for the euro against the dollar. Currently, the market lacks new economic data to drive price movements, and investors are focusing on policy expectations from the two major central banks, international oil prices, volatility in the technology sector, and overall market risk sentiment. While the euro has held above the 1.1400 level, it has struggled to generate significant upward momentum, and market funds are gradually shifting towards the US dollar.
The market has entered a wait-and-see phase.
Following last week's release of US employment data, the foreign exchange market entered a period of range-bound consolidation. Although the non-farm payrolls figure fell short of market expectations, it did not significantly alter market predictions regarding the Federal Reserve's monetary policy. Investors currently tend to hold long positions in the US dollar, awaiting clearer policy signals from Fed officials.
The U.S. ISM Services Purchasing Managers' Index (PMI) released on Monday came in at 54.0, largely in line with market expectations, confirming that the U.S. economy is maintaining a steady pace of expansion and that there is no risk of a new round of rising inflation. Meanwhile, Federal Reserve Governor Christopher Waller reiterated his consistent stance: upside risks to inflation have not subsided, and questioned whether excessive forward guidance is truly beneficial to the market.
Today's US economic data schedule is sparsely packed with major indicators, and market focus has already shifted to the FOMC meeting minutes due on Wednesday. If the minutes signal that officials are inclined to tighten monetary policy in the coming months, the US dollar will continue to receive support.
Leaving aside economic fundamentals, the trend of crude oil prices deserves close attention. Affected by the continued geopolitical tensions in the Strait of Hormuz (news surrounding missile attacks on multiple merchant ships), international oil prices have rebounded for four consecutive days. Although current oil prices have fallen significantly from the highs driven by geopolitical conflicts, continued market concerns about crude oil supply shortages have kept prices stable around the $70 mark, indirectly increasing the safe-haven appeal of the US dollar.
The euro lacks new positive drivers and its performance remains weak.
The outlook for the euro is mixed. German industrial production data released today for May unexpectedly improved, rising 0.9% month-on-month, with significant rebounds in automobile manufacturing and construction output. This strong data indicates that the European industrial sector's ability to withstand the impact of recent geopolitical conflicts far exceeds previous pessimistic market expectations.
However, the recovery in industrial data alone is insufficient to completely reverse market expectations regarding the European Central Bank's monetary policy. The market is still debating whether the ECB will need to raise interest rates further this year, and a September rate hike is no longer considered the most probable event.
However, ECB officials are unlikely to declare victory in the inflation war in the short term. Core inflationary pressures remain high, and the central bank's overall policy stance will remain cautious. Several senior ECB officials will speak this week, and they are likely to reiterate that the fight against inflation is not yet complete. While this rhetoric may provide some temporary support for the euro, it is unlikely to counteract the current comprehensive strengthening of the US dollar.
EUR/USD Technical Analysis: The market may continue to trade within a range.
(EUR/USD daily chart source: FX678)
From a technical analysis perspective, the euro/dollar pair is likely to maintain a sideways trading pattern in the short term. The pair is currently trading above the 1.1410 support level; if this support is breached, the price may test the 1.1300 level.
On the upside resistance side, the 1.1450–1.1470 range is a key resistance zone for the euro against the US dollar; after breaking through this range, the next level to watch is the psychological level of 1.1500, and then 1.1575.
For the euro to experience a substantial short-term rally against the dollar, two key preconditions need to be met: a significant market correction of expectations for a Federal Reserve rate cut, or a marked weakening of US economic data. However, neither of these scenarios is likely to materialize in the short term. Therefore, with market volatility remaining low, funds continue to chase the dollar's relatively higher yield advantage.
Overall, the euro/dollar pair remains slightly bullish for the dollar in the short term. Unless the upcoming FOMC meeting minutes release unexpectedly dovish signals or ECB officials make hawkish comments on interest rate hikes, the pair will likely continue to trade near the lower end of its recent trading range; any short-term price rebound is highly likely to attract short sellers.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
