The EUR/USD pair declined for 25 full days, apart from a few brief pauses. During this period, the euro lost 530 points, and its prolonged weakness began more than a month ago as the market positioned itself for an FOMC rate hike. Only toward the end of last week did bulls manage to launch a noticeable counterattack. This occurred on days when the US dollar could easily have continued to strengthen. As a reminder, US consumer price inflation exceeded forecasts, core inflation also came in above market expectations, and the Producer Price Index subsequently showed a much sharper acceleration than the market had anticipated. Since all three inflation indicators are rising more strongly and rapidly than the Fed expects, the dollar could have strengthened in line with a straightforward relationship: higher inflation increases the likelihood of tighter Fed monetary policy.

However, over the past two weeks, no FOMC member has spoken in favor of monetary policy tightening in October. On Friday, Fed Governor Kevin Warsh delivered a speech but did not forecast or announce further policy tightening either. In other words, Fed policymakers have given the market no indication that higher inflation should lead to a more hawkish policy stance. In this assessment, the bears have been on the offensive for too long, and the dollar has strengthened excessively in anticipation of the Fed's planned rate hikes. Meanwhile, traders have simply ignored the prospect of, and previous, rate hikes by the ECB and the Bank of England.

Nevertheless, it is too early to conclude that the euro's decline has ended. Imbalance 24 remains valid, and the price could react to it by generating a sell signal. The bears have advanced too far to be easily stopped at this stage. Although the market has largely ignored the fundamental factors supporting the euro for more than a month, this does not mean that the euro will now rise continuously. First, Imbalance 24 needs to be invalidated, and the bulls need to establish their own bullish patterns.

In September, the FOMC not only raised interest rates but also signaled its willingness to continue tightening monetary policy. This was enough to sustain the bears' extensive advance. However, even after the Fed's September tightening and the possibility of another rate hike in December, it would be incorrect to conclude that the euro has received no positive news during this period.

Overall, the fundamental backdrop continues to favor the bulls. Although the Fed has adopted a more hawkish monetary policy stance, monetary policy is not the only factor determining exchange rates. The European Union also faces challenges, but the key point is that problems exist everywhere, while only the euro is declining. Both central banks are tightening monetary policy, yet only the US dollar is appreciating. Geopolitical challenges affect both the United States and the European Union, but the market continues to focus primarily on the dollar.

The current chart structure indicates that bearish momentum remains firmly in place, with no clear signs of reversal. The only relevant pattern at present is Imbalance 24, which could be tested in the near future, as a corrective rebound has already begun. The bulls' main opportunity lies in a liquidity sweep below the 1.1066 low. However, a liquidity sweep alone is insufficient to justify opening long positions.

There was no significant economic news on Monday. Public unrest continues in France and has begun to spread to other EU countries. However, this does not appear to be a sufficiently significant factor to prompt a reaction from currency traders. The corrective rebound could continue this week.

The bulls still have numerous reasons to launch another advance in 2026. Structurally and fundamentally, Trump's policies, which caused a substantial decline in the US dollar last year, have not changed. At present, there are no major factors supporting the US currency, despite the FOMC's hawkish stance. Geopolitical developments, which supported demand for the US dollar during much of the first half of 2026, are no longer providing the same support.

Economic Calendar for the United States and the European Union:

• Germany – ZEW Economic Sentiment Index (09:00 UTC).
• European Union – ZEW Economic Sentiment Index (09:00 UTC).
• United States – Building Permits (12:30 UTC).
• United States – Housing Starts (12:30 UTC).

On October 20, the economic calendar contains four releases, all of medium importance. The impact of economic data on market sentiment on Tuesday is expected to be limited.

EUR/USD Forecast and Trading Recommendations:

In this assessment, the pair remains in the process of forming a bullish trend that has been interrupted by a year-long corrective phase. The fundamental backdrop shifted sharply in favor of the bears eight months ago, but the trend that has lasted for four years cannot yet be considered invalidated or complete. The bulls could resume their advance before the end of the year, but their main tangible opportunity at present is the 1.1066 low established in June last year. The bears received a new sell signal within Imbalance 19. For now, existing short positions can be maintained. A new sell signal could form within Imbalance 24. Given the relatively high probability of a continued corrective rebound, partial profit-taking on short positions may be worth considering.