EUR/USD traded at 1.1228 on Monday, November 2, reflecting an increase of 62 pips or 0.56% from Friday’s close of 1.1166. The pair commenced the week close to its lows, registering 1.1156 during the Asian session, before experiencing a consistent ascent throughout the European morning, reaching an intraday peak of 1.1240. The euro maintained its gains as the U.S. market opened, fluctuating between 1.1215 and 1.1240 during the initial hour of trading in New York. Against a basket of major currencies, the single currency appreciated by 0.49% on the day. The dollar undertook the substantial effort. The U.S. Dollar Index declined by 0.34% to 101.53, continuing a downward trend that commenced following the Federal Reserve’s decision on October 28. The index has experienced a decline in four of the last five sessions, even as the Federal Reserve maintained its current interest rates, with two officials advocating for an increase. Given that the euro constitutes 57.6% of the dollar index, the movements of EUR/USD and the index are closely correlated: a 1% increase in EUR/USD results in a decrease of 0.58 points in the index, assuming all other factors remain constant. The catalyst for Monday’s movement was crude oil. WTI experienced a decline of 6.28%, settling at $97.58 prior to the U.S. market opening, while Brent fell to $106 following Iran’s proposal to reopen the Strait of Hormuz within two days, contingent upon Washington fulfilling its conditions. For the euro area, characterised as a net energy importer facing energy inflation of 18.9%, each dollar decrease in oil prices enhances the trade balance, alleviates the inflationary pressure on households, and diminishes the likelihood that the European Central Bank will face a dilemma between combating inflation and safeguarding growth.
The forecast thesis is precise. The euro’s rebound from 1.1156 represents a significant energy-relief rally, having successfully navigated its initial technical challenge by surpassing the 20-day moving average at 1.1196. However, the pair is contending with three structural headwinds that limit the potential for appreciation: a 150-basis-point policy rate differential favouring the dollar, a fiscal crisis in France that has widened the OAT-Bund spread to 165 basis points, and market expectations for a Federal Reserve rate hike in December with probabilities as high as 85%. That combination establishes a ceiling within the 1.1255 to 1.1300 range, maintaining the pair’s position until the release of Friday’s U.S. jobs report and Wednesday’s eurozone inflation data, which are expected to provide a definitive signal. The magnitude of the movement aligns with that range perspective. The 62-pip gain offsets the losses incurred in the last week of October, during which the pair declined by 0.4%. However, it positions EUR/USD at 2.9% beneath its 200-day moving average of 1.1559 and 7% below the peak of 1.2067 recorded in 2026. A daily close above 1.1285 would indicate the initial signal that the downtrend is reversing. A close below 1.1113 would indicate that Monday’s bounce was merely a pause rather than a reversal. The trajectory of EUR/USD for 2026 has unfolded in two distinct phases, each significantly influenced by energy dynamics.
The pair commenced the year at 1.1714, surged to its 2026 peak of 1.2067 during the first quarter, and maintained a position above 1.18 throughout February, concluding the month with the euro at 1.1826. The dollar exhibited weakness, with the U.S. Dollar Index reaching a 52-week low of 95.55 on January 27, as markets anticipated rate cuts from the Federal Reserve. The conflict in Iran has altered that trajectory. As crude prices surged in March, inflation expectations increased on both sides of the Atlantic, leading the market to abandon rate-cut bets. EUR/USD declined to 1.1568 by March 31. The Fed initiated its rate hikes in September, marking the first increase since 2023, while the dollar index ascended to a 52-week peak of 102.95 on October 14. The ECB also raised rates, in June and again in September, but the market interpreted the Fed’s trajectory as more assertive. Month-end adjustments reflect the decline. The pair concluded June at 1.1506, dipped to 1.1422 by the end of July, experienced a rebound to 1.1590 at the close of August, subsequently declined to 1.1514 at the end of September, and further decreased to 1.1203 by the end of October. That October move, from 1.1514 to 1.1203, represented a 2.7% decline, marking the euro’s most significant monthly decrease of the year. The low of 1.1120 observed in 2026 occurred amid that decline.
At 1.1228, EUR/USD is positioned 108 pips above the yearly low, reflecting a decline of 4.1% year to date. The average rate delineates the extent to which the pair has deviated from its 2026 norm. The EUR/USD exchange rate has maintained an average of 1.1568 from January to October, which is 340 pips higher than the present level. In 2025, the pair recorded an average of 1.1300. In the years 2024 and 2023, the averages were recorded at 1.0824 and 1.0813, respectively. On a two-year horizon, the present price is positioned between the averages for 2025 and 2026, reflecting a dollar that has appreciated due to rate differentials, yet not reaching the extremes observed in 2022, when the pair was trading below parity. The weekly chart illustrates the point at which the selling momentum came to a halt. The EUR/USD pair rebounded from its 200-week simple moving average around 1.1100 in late October, a threshold that has historically served as a significant support level throughout the cycle. The pair is currently positioned beneath its 100-week moving average at 1.1385 and its 20-week moving average at 1.1428. That configuration describes a pair in a medium-term downtrend that has established a floor at long-term support, the precise setup in which relief rallies typically advance by 1% to 2% before encountering sellers at the shorter-term averages.
