EUR/USD Price Forecast: Drops to Four-Week Low as Hawkish Fed Bets Accelerate

The euro extended its decline on Monday, touching a four-week low intraday and trading near 1.1566. The dollar drew broad safe-haven bids, supported by rising expectations of a hawkish Federal Reserve, higher oil prices, and geopolitical turmoil, keeping the euro under sustained pressure.

**Hawkish Fed Bets Accelerate, Dollar Demand Solid**

Markets are positioning ahead of potential hawkish signals from the Fed, with the release of meeting minutes later this week viewed as a key catalyst. According to ING analysts, unless US economic data unexpectedly undershoots or the minutes deliver a surprise dovish shift—both of which currently appear unlikely—the dollar's near-term strength is hard to reverse. Meanwhile, several major Wall Street banks have turned bearish on the euro, with institutions such as JPMorgan and Morgan Stanley projecting the currency could slide further toward 1.10 over the next year.

**Lack of Strong Support Within the Eurozone**

Although several European Central Bank officials are scheduled to speak this week, ING expects limited market impact. In France, far-right leader Marine Le Pen confirmed her candidacy for the 2027 presidential election, but market reaction was muted, with the French-German bond yield spread holding near 80 basis points. ING analyst Pesole noted that markets may have already priced in the political risk, limiting the event's impact on the euro, yet near-term downside risks for EUR/USD persist, with a break below 1.140 this week seen as highly likely.

**Technical and Flow Bias Tilts Bearish**

Options market sentiment has turned clearly pessimistic, particularly in longer-dated contracts. Morgan Stanley strategists said medium-term investors are unwinding structural dollar short positions, and speculative flows could add to positions as momentum builds, leaving EUR/USD vulnerable to a slide toward the 1.10 level. Several institutions have recently cut euro forecasts sharply, with JPMorgan lowering its mid-2027 target to 1.10, while RBC projects that level to be reached by the end of next year.