EUR/USD Forecast: Bears Target Critical 61.8% Fibonacci Support at 1.1775 Amid Policy Divergence

Currency traders globally are closely monitoring the EUR/USD pair as bearish pressure intensifies, testing a crucial technical bastion—the 61.8% Fibonacci retracement support near the 1.1775 area. This level, derived from the pair’s significant rally from the March 2023 lows to the July 2024 highs, represents a major psychological and technical threshold that could dictate the medium-term trend for the world’s most traded currency pair. Market sentiment has shifted notably in recent weeks, driven by evolving central bank policy expectations and contrasting economic data from the Eurozone and the United States.

EUR/USD Forecast: Decoding the 61.8% Fibonacci Retracement Level

The 61.8% Fibonacci retracement, often called the ‘golden ratio,’ holds substantial weight in technical analysis. For EUR/USD, this level near 1.1775 is calculated from the swing low of 1.0516 in March 2023 to the swing high of 1.3142 in July 2024. A decisive break below this support could signal a deeper correction, potentially towards the 78.6% level near 1.1420. Conversely, a firm bounce would suggest the broader uptrend remains intact. Analysts at major investment banks, including Goldman Sachs and Deutsche Bank, frequently reference this level in their client notes, highlighting its institutional relevance.

Currently, the pair exhibits several bearish technical signals. The 50-day Simple Moving Average (SMA) has crossed below the 200-day SMA—a pattern known as a ‘death cross’—which many traders interpret as a long-term bearish signal. Furthermore, the Relative Strength Index (RSI) on the daily chart has consistently hovered below the 50 midline, indicating sustained selling momentum. However, the RSI is not yet in oversold territory (below 30), suggesting there may be room for further downside before a potential rebound.

Fundamental Drivers: ECB and Fed Policy Divergence

The technical pressure coincides with a widening fundamental divergence between the European Central Bank (ECB) and the U.S. Federal Reserve. While both institutions have paused their historic rate-hiking cycles, their forward guidance and economic backdrops differ markedly. The Fed has adopted a ‘higher for longer’ stance, with Chair Jerome Powell emphasizing persistent inflationary pressures in the services sector during recent congressional testimonies. Strong U.S. labor market data and robust consumer spending have supported this cautious approach.

In contrast, the Eurozone economy shows clearer signs of stagnation. Preliminary Q4 2024 GDP data indicated a contraction of 0.1% in Germany, the bloc’s largest economy. Consequently, ECB President Christine Lagarde has signaled a greater willingness to consider rate cuts in 2025, potentially ahead of the Fed. This policy divergence directly pressures EUR/USD, as higher relative U.S. interest rates typically bolster demand for the dollar.

Key Economic Catalysts and Event Risk Timeline

The immediate trajectory for EUR/USD will likely hinge on upcoming data releases and central bank communications. The following table outlines critical events for the remainder of Q1 2025:

A hotter-than-expected U.S. CPI print could reinforce Fed hawkishness, driving further dollar strength. Conversely, a dovish tilt from the ECB on March 14th would exacerbate the pair’s bearish momentum. Traders also monitor geopolitical developments, as the pair remains sensitive to energy price shocks stemming from tensions in the Middle East, which disproportionately affect the energy-import-dependent Eurozone.

Market Structure and Institutional Positioning

Commitment of Traders (COT) reports from the Commodity Futures Trading Commission (CFTC) reveal a significant shift in positioning. As of the latest report, leveraged funds have increased their net short positions on the euro to the highest level since September 2024. This speculative positioning often acts as a contrarian indicator at extremes, but it currently reinforces the prevailing bearish trend. Meanwhile, real money accounts, including asset managers and institutional investors, have been gradually reducing their long euro exposure, according to data from Morgan Stanley.

Options market dynamics also provide insight. The one-month risk reversal for EUR/USD—which measures the premium of calls over puts—has turned negative. This indicates that traders are willing to pay more for protection against a decline (puts) than for the chance of a rally (calls), reflecting a bearish market bias. Key support and resistance levels identified by major option barriers include:

• Strong Support: 1.1750 – 1.1775 (61.8% Fibo & Psychological Level)
• Minor Support: 1.1690 (Previous Weekly Low)
• Immediate Resistance: 1.1850 (20-day SMA)
• Major Resistance: 1.1950 (200-day SMA & 50% Fibo)

Historical Context and Volatility Analysis

The 1.1775 area is not a novel battleground. This level provided substantial resistance throughout late 2022 before finally breaking in early 2023, which then turned it into support during pullbacks in mid-2023. This principle of ‘role reversal’—where prior resistance becomes support—adds to the technical significance of the current test. Historical volatility, as measured by the 30-day implied volatility gauge, has risen from yearly lows but remains below the 5-year average, suggesting markets are not pricing in extreme near-term moves despite the key technical test.

Conclusion

The EUR/USD forecast hinges decisively on the pair’s interaction with the 61.8% Fibonacci retracement support near 1.1775. A confluence of bearish technical signals, widening ECB-Fed policy divergence, and shifting institutional positioning creates significant downward pressure. However, the historical importance of this level suggests a fierce battle between bulls and bears is imminent. Traders should monitor the upcoming U.S. CPI data and ECB meeting for fundamental catalysts that could break the stalemate. A sustained break below 1.1750 would open the path toward 1.1420, while a firm rejection higher would target a retest of the 200-day SMA near 1.1950. The resolution at this critical Fibonacci juncture will likely set the tone for the EUR/USD forecast for the remainder of Q1 2025.

FAQs

Q1: What is the 61.8% Fibonacci retracement level, and why is it important for EUR/USD?
The 61.8% Fibonacci retracement is a key technical analysis tool derived from the ‘golden ratio.’ For EUR/USD, it marks a level (near 1.1775) that often acts as strong support or resistance, representing a potential turning point based on the prior major price move from March 2023 to July 2024.

Q2: What fundamental factors are currently pressuring the EUR/USD pair lower?
The primary fundamental pressure stems from monetary policy divergence. The U.S. Federal Reserve maintains a ‘higher for longer’ interest rate stance amid resilient economic data, while the European Central Bank faces a weaker growth outlook, increasing the likelihood of earlier rate cuts, which diminishes the euro’s relative yield appeal.

Q3: What would a decisive break below 1.1775 support signify for the EUR/USD forecast?
A daily or weekly close below the 1.1750-1.1775 support zone would be a significant bearish technical development. It would suggest the corrective phase is deepening, with the next major downside target being the 78.6% Fibonacci retracement level near 1.1420.

Q4: How are institutional traders currently positioned in the EUR/USD market?
According to CFTC Commitment of Traders reports, leveraged funds have built substantial net short positions on the euro, reflecting a bearish speculative bias. Institutional investors are also reportedly reducing long exposure, aligning with the cautious technical and fundamental outlook.

Q5: What key events should traders watch that could impact the EUR/USD forecast near the 1.1775 level?
Traders should closely monitor the U.S. Consumer Price Index (March 12), the ECB monetary policy statement (March 14), and the Federal Reserve’s FOMC decision and updated ‘dot plot’ (March 20). These events will provide critical guidance on the interest rate divergence driving the pair.