EUR/USD weakens below 1.1700 as Fed keeps rates unchanged
The Fed's decision to hold rates unchanged reinforces the dollar's carry advantage and terminal rate premium over the ECB, pushing EUR/USD below the key 1.1700 support. The technical breakdown confirms the bearish trend, with spot now at 1.1500, well below our consensus median of 1.1800 for March 2026. The market is pricing in persistent divergence in monetary policy, as the Fed maintains elevated rates while the ECB faces headwinds from a weaker economy. This move aligns with our earlier divergence analysis, which highlighted the gap between consensus forecasts and spot levels.
Where it sits in our coverage
Our consensus EUR/USD target for March 2026 is 1.1800 (median across 8 firms), with Morgan Stanley at the upper bound (1.2000) and BofA and Barclays at the lower bound (1.1700). Spot at 1.1500 is already 2.6% below our consensus, reflecting the bearish momentum. Fxstreet's headline focuses on the Fed hold as the catalyst, which we see as reinforcing the existing technical breakdown rather than initiating a new move.
How firms align
Morgan Stanley's March 26 target of 1.2000 is notably more bullish than the consensus, while BofA and Barclays at 1.1700 are closest to current levels. The majority of firms project a recovery toward 1.1800-1.1900 by March, suggesting the consensus expects the weakness to reverse. However, the rapid move below 1.1700 puts those targets at risk, as spot momentum is firmly bearish.
What the data shows
Our internal research piece 'EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below' highlighted the disconnect between consensus forecasts and spot pricing. The current breakdown deepens that divergence: consensus still targets 1.1800-1.2200 over 2026, while spot is 2.6% below the near-term median. The firm-by-firm spread shows no extreme outliers, but the downward move challenges the consensus view that the euro will rebound.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD technical breakdown below 1.1700 confirmed; next support at 1.1400.
- 02Fed hold vs ECB divergence maintains USD carry advantage; terminal rate spread key.
- 03Consensus at 1.1800 for March 2026 faces downside risk if Fed rhetoric stays hawkish.
- 04Morgan Stanley's bullish 1.2000 target looks increasingly isolated.
Market implications
Watch for EUR/USD to test the 1.1400 support level, with the next catalyst being the ECB meeting in October. If the ECB signals a rate cut, the selloff could accelerate, pushing spot toward 1.1200. Our consensus for March 2026 at 1.1800 may need to be revised lower if the current momentum persists.
Risks to this view
A surprise dovish pivot by the Fed or a sharp deterioration in US data could reverse the USD strength, invalidating the breakdown. Additionally, a ceasefire in Ukraine or a strong eurozone GDP print would support EUR/USD back above 1.1700. The current view assumes continued Fed-ECB policy divergence.
Sentiment by currency
USD+EUR-JPY~GBP~Composite USD score: +0.45
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD strengthens as mixed US labor data and hopes for a US-Iran deal pressure the Greenback.
Soft US labor print reduces Fed rate-hike conviction; geopolitical risk-off from Iran talks risk-off flows weaken USD safe-haven demand.
EUR/USD: Recovery eyes full retracement – Scotiabank
EUR/USD recovery momentum suggests technicians are positioning for mean reversion toward recent highs, indicating potential USD weakness into resistance.
EUR/USD: Binary path around Gulf deal – ING
EUR/USD: Oil shock, real rates and conflict risks – Commerzbank
Oil shock transmission via real rates and geopolitical premium widens USD carry advantage; EUR structural support erodes as terminal rates diverge.
Cross-firm research
EUR/USD Trades 3.87% Below Consensus: What the Gap Reveals
EUR/USD spot at 1.1727 sits 3.87% below the eight-firm median Dec-26 target of 1.22, exposing a structural divergence that demands explanation.
EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below
Eight sell-side firms hold a median Dec-26 target of 1.22 for EUR/USD while spot trades at 1.1727, a gap that demands explanation.