**EUR/USD Price Forecast: Euro Holds 1.1600 as Fed Resistance Grows, Rate Cut Odds Drop to 56 Percent**
*By Nick Cawley, originally published at TradingNews.com*
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The EUR/USD pair has found support near the well-watched 1.1600 level as financial markets digest the latest signals from the US Federal Reserve. Market participants are recalibrating expectations for interest rate cuts as the Federal Reserve projects continued economic strength. As of this week, odds for a rate cut have fallen to 56 percent, bringing with it notable shifts in the world’s most-traded currency pair.
This article provides an in-depth analysis of the current EUR/USD forecast, examining recent price action, the influence of Fed policy, European Central Bank (ECB) developments, and what traders might expect moving forward.
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## Key EUR/USD Technical Developments
– EUR/USD clings to support near the 1.1600 level
– The pair has experienced repeated reversals lower from the 1.1700 and 1.1800 levels in the prior weeks
– Near-term momentum indicators suggest further hesitation above current levels
– Market participants eye potential technical breakdowns if US dollar demand accelerates
The 1.1600 region has acted as a psychological and technical anchor for the euro in recent sessions. A dip below this area, last observed earlier this year, prompted fresh buying interest and a subsequent rebound. Bulls have since managed to keep the pair hovering just above this level, despite repeated tests.
However, a descending series of daily highs since late May points to ongoing downward momentum. As long as EUR/USD remains under the 1.1700–1.1750 resistance band, traders may continue to test lower as US dollar strength persists.
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## Federal Reserve Sticks to Hawkish Tone
The most significant catalyst for EUR/USD in the near term comes from the Fed. The Federal Reserve’s recent communications—including minutes from its latest FOMC meeting and public remarks from policymakers—have underscored the central bank’s determination to stay the course on policy until further progress is made on inflation. This hawkish tone, at odds with more dovish expectations seen in the spring, has changed the probability calculus for traders:
– The chance of a rate cut by the end of this year has declined to 56 percent, according to futures pricing
– Markets had previously priced in nearly an 80 percent chance of a cut before recent data
– US dollar yields have stabilized and even risen in some places, lending further support to the greenback
The drop in rate cut expectations has renewed the divergence between the Fed and other major central banks. With the US showing resilience in labor and consumer data, Fed officials are less inclined to retreat from current interest rates, a stance that limits upside for riskier currencies, including the euro.
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### Fed’s Economic Assessment
Federal Reserve Chair Jerome Powell and his colleagues have highlighted several factors:
– Ongoing labor market strength, with unemployment remaining below 4 percent
– Robust consumer demand, despite some signs of moderation in inflation
– Continued growth in GDP, rebuffing fears of a near-term recession
– Evidence that past rate hikes are working but not yet sufficient to bring inflation sustainably back to target
These factors diminish the urgency for a near-term rates pivot. As a result, the greenback has attracted renewed haven flows, especially against the backdrop of political and economic uncertainties in the euro zone.
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## European Central Bank Holds Its Ground
On the other side of the equation, the European Central Bank has adopted its own cautious outlook. While the ECB has not signaled an imminent tightening or easing, policymakers have acknowledged slowing economic momentum across the euro area:
– Growth forecasts for the bloc have been revised lower in recent updates
– Wage gains are beginning to slow, limiting inflationary pressures from the labor market
– Policy normalization is not expected to accelerate with demand remaining weak
The contrast in central bank tones
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