EUR/USD at a Technical Crossroads: Can Eurozone Data Help the Pair Stabilize

EUR/USD has retreated from its 2025 highs and is approaching a former breakout area. Recent Eurozone inflation and industrial production data may influence expectations for European Central Bank (ECB) policy, while upcoming US economic releases could shape expectations for Federal Reserve policy. The market's response to these developments may provide further context on whether EUR/USD stabilizes near its former breakout zone or moves back into its previous trading range.

EUR/USD Tests a Former Breakout Area

The monthly EUR/USD chart shows a prolonged decline from 2021 to 2022, followed by an extended consolidation phase through early 2025. The pair subsequently advanced from around 1.02–1.04 toward 1.19–1.20 before retreating.

The recent pullback has brought prices back toward the 1.12 area, which coincides with the former breakout zone.

From an Auction Market Theory perspective, this area provides a reference for assessing whether the market continues to accept prices above the previous trading range or begins to establish value at lower levels.

A temporary move below support does not necessarily indicate a sustained breakdown. A recovery followed by continued trading above the zone may suggest that the former breakout area is still being accepted. Conversely, repeated unsuccessful attempts to reclaim the zone, followed by sustained trading below it, may indicate greater acceptance at lower prices.

The distinction between a brief price breach and sustained acceptance may therefore provide useful context when assessing the pair's broader market structure.

Figure1: EURUSD monthly chart, Tradingview.com

Monetary Policy Expectations and Economic Data

Eurozone Inflation and Economic Activity

Eurostat's September 2026 flash estimate showed eurozone inflation rising to 3.8% year over year, from 3.2% in August. Energy inflation accelerated to 18.8%, while services inflation edged up to 3.2% from 3.0%. Meanwhile, industrial production declined 0.1% month over month in July and was unchanged year over year.

These figures present a mixed economic picture. Higher energy inflation could keep headline inflation elevated, while subdued industrial production may weigh on the growth outlook. Their implications for the euro will depend partly on how incoming data affects market expectations for ECB policy.

US Inflation and the Dollar

According to the US Bureau of Labor Statistics, US CPI rose 3.7% year over year in September 2026, up from 3.4% in August, while core CPI increased 2.6% year over year. Monthly headline and core CPI rose 0.6% and 0.3%, respectively.

The September CPI report, released on October 14, 2026, showed higher-than-expected headline inflation. More persistent inflation could influence expectations for the timing of potential rate cuts, while softer readings could shift those expectations in the opposite direction.

However, EUR/USD's response will also depend on Eurozone developments, relative monetary policy expectations and how the data compares with market forecasts.

EUR/USD Technical Analysis: Two Possible Market Scenarios

Scenario 1: Price Stabilizes Above the Former Breakout Zone

The 1.12 area remains an important zone to monitor because it previously acted as a breakout area. A monthly close above 1.128 may provide one reference point for assessing whether EUR/USD continues to trade above the former breakout zone. This level should not be interpreted in isolation, as subsequent price behaviour and market conditions may affect the assessment.

Delta absorption on volume footprint charts could provide additional context on buying and selling activity, although it does not independently confirm a directional move.

If prices remain above the former breakout zone, the 1.19–1.20 area may serve as a reference, subject to intervening resistance and subsequent price behaviour. This area should be interpreted as a potential area of interest rather than an assured price destination.

Scenario 2: Price Returns to the Previous Trading Range

A monthly close below 1.114, particularly if followed by continued trading below this level, may provide context for assessing whether EUR/USD is moving back towards its previous consolidation range. This outcome is not certain and should be considered alongside subsequent price behaviour and market conditions. 

In this scenario, the 1.04–1.02 area may serve as a broader historical reference zone. The extent of any further move would depend on subsequent price behaviour and changing market conditions.

A close below support would not, by itself, establish that a sustained decline is underway. Prices could continue lower, stabilize or return above the former support area.

Key Takeaways for Traders

EUR/USD's monthly structure places the former breakout area around 1.12 in focus. Sustained price acceptance above or below this zone may provide context for assessing whether the pair is stabilizing or returning to its previous trading range.

Economic releases, relative monetary policy expectations and price behaviour around key technical areas are all relevant to the broader outlook. No single data release, monthly close or footprint signal can establish the pair's subsequent direction with certainty.

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Source: 

Euro area annual inflation up to 3.8%

Industrial production down by 0.1% in the euro area and by 0.3% in the EU

US CPI