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The EUR/USD pair extended its decline on Friday, retreating further following the US Federal Reserve’s September meeting. The US dollar found support as the Fed’s rhetoric proved less dovish than markets had anticipated.

While the central bank cut rates by 25 basis points and signalled two additional cuts in 2025, it projected only one further reduction in 2026, tempering expectations for more aggressive easing. Chair Jerome Powell described the decision as a “risk management” response to a softening labour market, emphasising that the Fed saw “no need to rush” into further moves.

The dollar drew additional strength from initial jobless claims data, which fell to 231,000 – below forecasts of 241,000 and well under the previous week’s revised figure of 264,000.

Earlier in the week, eurozone inflation held steady at 2.0% year-on-year in August, unchanged from July and slightly better than the 2.1% forecast.

Despite this week’s pullback, the broader trend for EUR/USD remains bullish.
 

Technical Analysis: EUR/USD

H4 Chart:
 

(Click on image to enlarge)

On the H4 chart, EUR/USD formed a consolidation range around 1.1800 USD before breaking downward. The pair is now extending its decline towards 1.1680 USD. Once this target is reached, a corrective rebound towards 1.1800 USD may follow. The MACD indicator supports this view: its signal line remains above zero but is trending firmly lower, reflecting building near-term selling pressure.

H1 Chart:
 

(Click on image to enlarge)

On the H1 chart, the pair completed a downward move to 1.1777 USD and a corrective bounce to 1.1845 USD. The market is now forming a new downward structure towards 1.1720 USD, with further downside potential to 1.1680 USD. A brief correction towards 1.1800 USD is possible before any renewed decline towards 1.1630 USD, and eventually 1.1550 USD. The Stochastic oscillator confirms the near-term bearish momentum, with its signal line below 50 and pointing downward towards 20.
 

Conclusion

EUR/USD is undergoing a technical correction after the Fed tempered expectations for aggressive easing. While the dollar has found near-term support, the euro’s underlying fundamentals remain steady, with inflation under control and growth concerns limited. The pair’s broader uptrend is likely to resume once the current corrective phase concludes, though a deeper retracement cannot be ruled out if US data continues to surprise to the upside. Traders will be watching next week’s eurozone PMI and US PCE data for fresh directional catalysts.

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