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EUR/USD inches higher ahead of ECB, FOMC this week

EUR/USD is rising modestly amid a weaker USD as attention turns to the Federal Reserve and ECB rate decisions this week and President Trump's meeting with China's Xi Jinping.

The spotlight is on Trump and Xi Jinping, who will meet this week with a deal framework already hashed out by top negotiators. Optimism has boosted to fresh record highs while pulling safe havens such as Gold and the USD lower.

Meanwhile, the Fed is widely expected to cut the rate by 25 basis points, but this has been priced in for some time. The question is whether the Fed will adopt a cautious stance to further cuts due to the lack of data from the ongoing US government shutdown, or whether the Fed will be more concerned with the impact of the prolonged shutdown in the US economy and jobs market.

The ECB is expected to leave its interest rate unchanged at 2%. After eight rate cuts since mid-2024, the ECB is widely expected to keep its rate unchanged for a third straight meeting.

In the September meeting, the central bank reiterated its data-dependent meeting-by-meeting stance. The ECB staff's projections forecast CPI of just 1.7% in 2026, below the 1.9% consensus, sparking a dovish reaction. However, overall, the ECB noted it is in a good place on policy, with inflation only modestly above the 2% target level at 2.2% in September, so there seems little reason to deviate.

The recent rise in the euro is also helping keep a lid on the price rebound, as the euro trades 10% higher against the US dollar year to date. Recent PMI data was also stronger than forecast, which is an encouraging sign, with regional growth looking more positive than at the start of the year. The economy is expected to grow over 1% in 2025.
 

EUR/USD forecast- technical analysis

EUR/USD inches higher for a sixth day, rising out of the near-term falling channel. Buyers will need to rise above the 50 SMA at 1.17 to stage a recovery towards 1.1780, the October high, and on towards 1.1830 and 1.1920, the 2025 high.

Support is seen at 1.1540, the October low. A break below here creates a lower low, bringing 1.14 into focus.

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Oil falls on expectations of another output hike from OPEC+

Oil prices fell for a second day as investors weighed up the prospect of a global supply surplus, progress in US-China trade talks, and the impact of U.S. sanctions on Russian oil.

While news of trump sanctions on Rosneft and Lukoil last week sent oil prices 7% higher, attention is now turning back to concerns over an impending oil glut with OPEC+ members expected to consider another production output increase for December at the next meeting on Sunday. The group is reportedly leaning towards a modest increase in December as it continues its push to regain market share.

Meanwhile, adding to the bearish sentiment is the expectation that UR's functions against Russian oil giants could be less severe than initially feared. Washington intends to make Russia's trade more costly but is not looking to trigger another spike in oil prices.

These factors are overshadowing optimism that a US-China trade deal this week could support the demand outlook. Trump and Xi Jinping will meet on Thursday.
 

Oil forecast-technical analysis

Oil’s recovery from the 56.00 low ran into resistance at the 50 SMA, the descending trendline, and is falling again. The price trades back into the falling wedge pattern and looks poised to test the 60.00 support. A break below here brings the 58.65, falling trendline support into play ahead of the 56-55.5 support zone.

Should the 60.00 support hold, buyers will look to retest the 62 resistance, the 50 SMA, and the falling trendline resistance. A rise above here brings 65.00 into play.

(Click on image to enlarge)

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