Upside Potential Builds as Price Tests Monthly Support

Forex

Economic

Summary:

A renewed test of support could provide additional time for the MACD structure to stabilize and allow the signal lines to move closer to a bullish crossover.

BUY EURUSD

EXP

PENDING

1.13530

Entry Price

1.15370

1.12800

1.13688 -0.00015 -0.01%

Pips

PENDING

1.12800

Exit Price

1.13530

Entry Price

1.15370

Markets opened the week facing renewed volatility following conflicting reports regarding a potential agreement between the United States and Iran. Earlier reports from Al Hadath suggested that Iran had agreed to halt its uranium enrichment program, fueling speculation that tensions in the region could ease. However, those claims were later denied by Press TV, which stated that Tehran’s position remains unchanged. Adding to the uncertainty, U.S. President Donald Trump rejected on Saturday the possibility of an agreement with Iran aimed at reopening the Strait of Hormuz, keeping geopolitical risks firmly in focus.

Against this backdrop, U.S. Treasury yields continued to move higher. The benchmark 10-year Treasury yield climbed to 5.27%, its highest level since June 2007, before trimming part of its gains and settling near 5.23%. The move reflects ongoing concerns surrounding inflation, monetary policy expectations, and geopolitical uncertainty.

Federal Reserve officials have also continued to express concerns about elevated inflation, reinforcing expectations that interest rates could remain higher for longer or move further upward if necessary. Fed Governor Lisa Cook adopted a notably hawkish tone, warning that inflationary pressures could remain persistent in the coming months due to the growing impact of artificial intelligence-related investment and the ongoing hostilities in the Middle East.

Attention this week will also focus on several key U.S. economic releases, including the Personal Consumption Expenditures (PCE) inflation report on Wednesday, the ISM Purchasing Managers' Index (PMI) on Thursday, and the Nonfarm Payrolls (NFP) report on Friday. These indicators could play an important role in shaping expectations regarding the future path of Federal Reserve policy.

Meanwhile, the European Central Bank raised its deposit rate to 2.50% on September 10, marking its second increase of the year. As of September 24, money markets were pricing in roughly a 60% probability of another rate hike at the ECB’s October 29 meeting. Notably, that decision will be announced one day after the Federal Reserve’s next policy decision, meaning ECB policymakers will know whether the interest rate differential with the United States has widened further before casting their votes. The ECB Governing Council meeting scheduled for Wednesday is not a monetary policy meeting and does not include any interest rate decisions on its agenda.

Speaking on Monday, ECB President Christine Lagarde stated that the central bank continues to see upside risks to inflation and downside risks to economic growth. She added that the outlook remains surrounded by elevated uncertainty and noted that inflation projections for 2027 and 2028 are now expected to be higher than previously anticipated.

Lagarde also emphasized that while inflation is expected to remain elevated, there are still no clear signs that inflationary pressures are becoming deeply entrenched. She described the ECB’s approach as a measured response aimed at keeping inflation under control and noted that interest rates currently stand near the upper end of the neutral range. Nevertheless, she stressed that the ECB is not conducting monetary policy based on estimates of the neutral rate alone. Upside Potential Builds as Price Tests Monthly Support_1

Upside Potential Builds as Price Tests Monthly Support_1

Technical Analysis

EURUSD recently touched the support level at 1.1353, a zone that had not been tested since July 28. During that previous visit, the level served as the foundation for a strong bullish move that eventually carried the pair to the local high at 1.1711 on August 20. If a similar price reaction develops once again, the pair could begin a fresh recovery from this area, with the first upside target located at 1.1537. This resistance level is aligned with the 0.618 Fibonacci retracement, adding technical significance to the zone. In addition, the 100-period and 200-period moving averages are positioned nearby at 1.1528 and 1.1473 respectively, creating a cluster of resistance levels that could attract price during a bullish retracement.

Looking at the oscillator area, the RSI currently stands near 34 after rebounding from a deeply oversold reading of 21 reached recently. This recovery suggests that bearish momentum may be losing strength and that buyers could begin returning to the market.

Meanwhile, the MACD has already moved into bullish territory, although the histogram has recently lost some depth. At the same time, the signal lines remain well inside bearish territory. A renewed test of support could provide additional time for the MACD structure to stabilize and allow the signal lines to move closer to a bullish crossover, which would add further technical support to a potential upside recovery.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1353

Target price: 1.1537

Stop loss: 1.1280

Validity: Oct 09, 2026 15:00:00

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Upside Potential Builds as Price Tests Monthly Support

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