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EUR/USD forecast: US yields and gas prices weigh on the euro
A widening US yield advantage and rising European gas prices are weighing on the euro. Two attempted chart reversals have failed to establish a lasting uptrend, although COT positioning offers a bullish counterpoint.
EUR/USD is attempting to stabilise after its latest decline. The IG indication trades around $1.1226 at 2:12pm BST on Monday 19 October, keeping the pair within its recent consolidation near the lows. Friday’s close of $1.1253 left the euro approximately 4.2% below its end-2025 level.
Why is the euro under pressure?
Two factors that supported the euro in 2025 have turned against it: the US–German yield differential and European natural gas prices.
During 2025, the yield premium on two-year US Treasuries over equivalent German government bonds narrowed by approximately 81 basis points. Meanwhile, European benchmark TTF gas prices fell 41.5%. EUR/USD gained 13.4% over the year.
Gas prices turned first in 2026. Between EUR/USD’s closing high of $1.1952 on 27 January and 7 April, TTF rose 32%. The euro declined 3.2% over that period, even though the US yield advantage narrowed by another 35 basis points.
Since April, the yield differential has also become a headwind. The US premium increased from 108 to 169 basis points, having briefly reached 179 basis points on 5 October. The analysis shows a −0.86 correlation between daily EUR/USD and yield-spread levels since April. A wider US yield advantage generally coincided with a weaker euro. This is a statistical relationship rather than proof of a single causal driver.
European gas prices have more than tripled
TTF has risen from €28.30 at the turn of the year to €87.72 per megawatt-hour, more than tripling and reaching its highest level since December 2022.
Higher energy import costs weigh on euro-area purchasing power. ECB analysis describes this mechanism as a deterioration in the terms of trade: the relationship between export and import prices. Persistently expensive energy can therefore create an additional drag on the European economy.
EUR/USD: From tailwinds to headwinds – yield spreads and European gas prices
EUR/USD technical analysis: Two double bottoms fail to reverse the trend
The daily chart shows two notable attempts to establish a bottom. The March double bottom initially triggered a recovery towards $1.17–$1.18, but failed to produce a lasting uptrend. EUR/USD subsequently declined towards $1.13.
The July bottoming formation also delivered only temporary relief. The recovery reached approximately $1.17 in August, before selling pressure returned in September. Both formations generated rebounds, but neither sustainably reversed the broader downward bias.
EUR/USD is now consolidating between approximately $1.1110 and $1.1280–$1.1300. The declining 100-day exponential moving average near $1.1450 remains well above the market and represents an important medium-term resistance level.
The 34-period RSI approached 30 during October and remains below the 48.5 threshold used in this analysis. A sustained recovery above that level would indicate improving momentum. Combined with a break above $1.1280–$1.1300, it could support a recovery towards $1.1350 and $1.1450.
EUR/USD daily chart: Failed reversals and consolidation below the 100-day EMA
COT report: Euro positioning offers a bullish counterpoint
Positioning provides a contrasting signal. The CFTC’s combined futures and options report dated 13 October shows commercial traders holding a net-long position of 135,961 contracts. Large speculators, or non-commercial traders, hold a net-short position of 162,986 contracts.
In the three-year Larry Williams-style positioning analysis, the commercial index stands at 100, while the speculative index is at 0. These readings place the two groups at opposite extremes of their respective historical ranges, supporting a bullish contrarian interpretation.
This does not confirm an imminent reversal. Commercial positions can reflect hedging activity, and positioning extremes can persist. However, a sustained price recovery could prompt speculators to close short positions, adding momentum to the rebound. The index readings are not probabilities of success.
Euro COT positioning: Commercials reach a bullish extreme
EUR/USD outlook: Short- and medium-term bearish setups
Until EUR/USD sustainably recovers the top of its consolidation and the declining 100-day EMA, the following conditional bearish scenarios remain relevant:
| Scenario | Required confirmation | Potential targets | Invalidation |
|---|---|---|---|
| Short term: Rally rejection | Rejection around $1.1280–$1.1300, followed by renewed weakness | $1.1200, then $1.1120 | Sustained breakout above $1.1300 |
| Short term: Downside breakout | Daily close below $1.1110–$1.1100, followed by a failed retest of broken support | $1.1000 | Sustained recovery into the previous trading range |
| Medium term: Recovery fails at the EMA | Rally towards $1.1400–$1.1450, followed by renewed selling | $1.1300, $1.1120, then $1.1000 if support breaks | Sustained recovery above the 100-day EMA and the $1.1450 area |
The positioning extreme also creates the risk of a sharp countertrend rally, making price confirmation particularly important for bearish setups. A breakout above $1.1300 accompanied by an RSI recovery above 48.5 would initially strengthen the recovery scenario.
EUR/USD: Five-Year Price Performance
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