EUR/USD touched 1.1161 on Oct. 5, its weakest since May 2025, as the single currency extended a slide that has now cost it more than 3% in five weeks. The pair traded near 1.1182 on Monday, and the drivers behind the move have shifted in a way that worries currency strategists.
What started as a dollar story in mid-September, when a hawkish Federal Reserve raised rates and signaled another hike this year, has become a euro problem. Widening French bond spreads, doubts about the 2027 budget, Italy's plans for a wider deficit, and a snap election in Spain on Nov. 29 have all piled pressure on the currency. "The euro hasn't been able to get traction," said Jane Foley, head of FX strategy at Rabobank.
From dollar strength to euro weakness
The shift in narrative is the key development. According to KBC, euro weakness has taken over from dollar strength as the main driver of the pair. That matters because it changes what could reverse the trend.
The Fed's September hike and its signal of another move this year initially did the damage. But a weak US payrolls print of just 29,000 jobs lifted the euro for only a day — a sign that buyers are hard to find even when US data disappoints.
Europe's own problems have since taken over. The gap between French and German 10-year yields has widened to levels last seen during the 2012 debt crisis, as investors question whether France can pass its 2027 budget. Italy, meanwhile, plans a wider deficit. Spain's snap election on Nov. 29 adds another layer of uncertainty. And Brent crude above $100 is lifting inflation while threatening growth — a combination that makes the European Central Bank's job harder.
The ECB resumed hiking early, but officials have since played down an October move. That hesitation has left the euro without a clear policy tailwind.
Technical breakdown points to 1.1110 and below
On the weekly chart, the euro was rejected from the 1.18 resistance zone and is now falling toward the 0.382 Fibonacci retracement at 1.1110. That level was a former ceiling that turned into support in May 2025. If it breaks, the next stops are 1.08, then the 0.618 golden pocket at 1.0509, and an ascending trendline from 2022 near 1.07.
The Relative Strength Index stands at 34 and is still falling, though it is nearing a support line that has held since 2022. The daily chart shows lower highs and lower lows since January inside a descending parallel channel. The 20-day moving average has repeatedly rejected retests from below, each time leading to another lower high. It has not been tested since September and now sits near 1.13, at the channel's midline. The channel's lower band runs near 1.10, slightly below the 0.382 Fibonacci level.
Banks split on where the euro goes next
Forecasters are not aligned. MUFG sees 1.10 if French spreads keep widening. ABN AMRO targets 1.15 by year-end. The gap reflects a broader debate about whether this is a temporary risk-off move or the start of a deeper repricing of European assets.
For now, the market is leaning bearish. The euro has failed to hold even short-lived rallies, and the technical picture suggests the path of least resistance remains lower until proven otherwise.
Three dates that could decide the next move
US inflation data on Oct. 14 is the first test. A soft print could give the euro a reprieve, though recent experience suggests any bounce may be sold. Then comes the Fed meeting on Oct. 28 and the ECB meeting on Oct. 29.
The Fed is expected to stay hawkish, while the ECB's reluctance to commit to another hike leaves the euro exposed. If French spreads continue to widen into those meetings, the 1.1110 support may not hold. A break there would put 1.08 in play and raise the question of whether the 2022 trendline near 1.07 becomes the next battleground.
For now, traders are watching two things: whether the RSI's long-held support line finally gives way, and whether European policymakers can reassure bond markets before the October meetings. Neither is guaranteed.
