**EUR/USD Forecast: 1.17 Support Holds as ECB-Fed Policy Divergence Eyes 1.18 Break**
*Original article by Skerdian Meta, FXLeaders.com (July 27, 2025). This is a rewritten and expanded version.*
The EUR/USD pair remains one of the most closely monitored currency pairs in the forex market, and recent developments have sharpened attention on its future trajectory. With the pair holding firmly above the 1.1700 support mark, investors are questioning whether the Euro can push further to challenge the psychologically important 1.1800 level.
The key focus remains the policy divergence between the European Central Bank (ECB) and the United States Federal Reserve (Fed). As central banks proceed with divergent monetary policy paths, market volatility and shifting investor sentiment have driven substantial activity in the EUR/USD pair.
This analysis explores the latest market developments affecting EUR/USD, technical chart readings, central bank outlooks, and macroeconomic trends influencing short- and medium-term expectations for the world’s most traded currency pair.
## Current Market Overview
The EUR/USD currency pair has held above the 1.1700 level in recent trading sessions following some mild pullbacks over the past week. After reaching intra-month lows near 1.1695, buyers stepped back in to support the pair, reaffirming the key 1.1700 barrier.
This stability comes amid increasing expectations of a policy divergence scenario:
– The Federal Reserve continues to lean towards maintaining high interest rates in response to persistent inflationary pressures and ongoing labor market resilience.
– Meanwhile, the European Central Bank appears to be taking a more dovish stance amid signs of slowing growth across the Eurozone and falling inflation prints.
This divergence in policy trajectory is becoming a dominant theme for forex traders moving forward.
## ECB Outlook: Dovish Tilt Gaining Momentum
The European Central Bank has made cautious steps toward more accommodative policy, responding to growing concerns around economic fragility in key Eurozone economies—particularly Germany and Italy.
Recent macroeconomic indicators suggest that inflation is declining faster than expected across the Eurozone. Meanwhile, economic growth remains subdued, pointing to potential deflationary risks if not properly addressed.
Highlights from the ECB policy direction:
– ECB held interest rates steady at its last meeting but opened the possibility for cuts in the coming quarters, depending on economic performance and inflation data.
– July PMI data revealed further contraction in manufacturing, with services growth also slowing, adding to the concerns surrounding economic momentum.
– The latest Harmonized Index of Consumer Prices (HICP) showed annual inflation nearing the ECB’s 2% target, allowing room for potential easing measures through Q4 2025.
ECB President Christine Lagarde has maintained a cautious tone, emphasizing that monetary decisions will remain data-dependent, with a balancing act between taming inflation and avoiding a prolonged recession.
## Fed Stance: Rate Cuts Postponed
In contrast, the U.S. Federal Reserve has taken a more hawkish tone as U.S. inflation remains elevated above the target and consumer spending continues to support headline GDP growth.
At its July 2025 meeting, the Fed issued a firm message that rate cuts are unlikely in the near term, reaffirming its commitment to price stability. Fed Chair Jerome Powell underlined the importance of assessing inflation trends over multiple months before shifting policy.
Current U.S. macro indicators:
– The June U.S. CPI report revealed a 4.1% year-over-year increase, still far above the Fed’s 2% target.
– Unemployment remains low at 3.6%, suggesting a tight labor market.
– Strong consumer demand, robust housing data, and rising wages have led Fed officials to reassess earlier expectations of a rate cut by September.
Accordingly, markets have shifted their expectations, postponing the potential beginning of rate cuts into late Q4 or early 2026.
## Chart Analysis: EUR/USD Technical Levels
From a technical standpoint, EUR/USD has stabilized
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