EUR/USD had been declining for 18 consecutive days, apart from several minor pauses. During this period, the European currency lost 470 points. The decline in the European currency began a month ago as the market prepared for an FOMC rate hike. Since then, the market has continued to buy the dollar, using any formal justification available. In market terminology, such movements are referred to as "order flow," meaning the flow of orders. Typically, large market participants build up an order flow over a certain period, after which the orders begin to be executed. At that point, the fundamental background becomes much less important. The orders have already been placed and are being executed. This results in a sustained movement in one direction on the charts without any indication of a corrective recovery.

Last week, public protests began in France over cuts to education spending. Hundreds of schools have been closed, clashes with police have been occurring regularly in the streets, vehicles have been set on fire, and stores have been damaged. On Monday, it became known that France faces a budget shortfall of several tens of billions of euros that needs to be covered, most likely through higher taxes and spending cuts. In addition, government bond yields are rising in France, as well as in many other EU countries and the United States. This places additional pressure on a budget that is already under significant strain. All of these factors provide reasonable grounds for selling the euro and buying the dollar. However, is the market focusing only on the negative factors?

So far, nothing has been able to stop the decline in the European currency. Neither tighter ECB policy, nor positive economic data from the European Union, nor disappointing U.S. labor-market data, nor the technical picture and bullish patterns have been sufficient. Since imbalance 19 has been invalidated, the European currency now has a strong possibility of declining below the psychological level of $1.10. Bullish imbalance 19 has turned into a bearish inverted imbalance and generated a sell signal. Bullish traders failed to use bullish imbalance 19, failed to use two bullish swings, and failed to benefit from the weak U.S. labor-market data. This week, bearish traders may resume selling after imbalance 24 is reached. Therefore, the current recovery in the European currency remains only a weak corrective move.

In September, the FOMC not only raised the interest rate but also indicated its willingness to continue tightening monetary policy. This was sufficient for the large-scale decline in the pair to continue. Even after the Federal Reserve tightened monetary policy in September and potentially tightened it again in October or December, there were still reasons for the European currency to record some recovery during this period.

Overall, the fundamental background continues to favor bullish traders. Despite the Federal Reserve's more hawkish monetary policy stance, this is not the only factor determining exchange rates. U.S. bond yields have reached record levels, placing a substantial burden on the federal budget; the U.S. economy has slowed in recent quarters; the U.S. labor market has more frequently produced disappointing results than positive surprises; Donald Trump resumed trade and non-trade disputes with numerous countries in 2026; and the U.S. stock market continues to raise significant concerns because of uncontrolled credit-financed investment in technology companies involved in artificial intelligence development.

The current technical picture indicates that bearish momentum remains in place. Last week ended with the formation of a new bearish imbalance 24, which may provide traders with another sell signal this week. Bullish traders can now focus only on the next nearby swing at 1.1066 and a possible liquidity sweep of that level.

The fundamental background was virtually absent on Tuesday, and there were no important developments during the day. Bullish traders made a limited attempt to recover, but it is still too early to speak of a sustained upward move. The opportunity was available last Friday, but bullish traders did not use it.

There are still numerous reasons for bullish traders to initiate an upward move in 2026. Structurally and globally, Trump's policies, which resulted in a significant decline in the dollar last year, have not changed. At present, there are no significant factors supporting the U.S. currency despite the FOMC's hawkish stance. Geopolitical factors, which supported demand for the U.S. currency during most of the first half of 2026, are no longer providing the same support.

Economic Calendar for the United States and the European Union:

• Germany – Change in Industrial Production (06:00 UTC).
• United States – FOMC Meeting Minutes (18:00 UTC).

The economic calendar for October 7 contains two entries, neither of which can be considered important. The fundamental background is unlikely to have a significant impact on market sentiment on Wednesday.

EUR/USD Forecast and Trading Tips:

The pair remains in the process of forming a bullish trend that has been in a corrective phase for an entire year. The fundamental background shifted sharply in favor of bearish traders seven months ago, but the broader trend, which has been in place for four years, cannot yet be considered invalidated or complete. Bullish traders may resume an upward move in 2026, but the only significant technical opportunity currently available is the 1.1066 low established in June last year, where a liquidity sweep could occur. Bearish traders received a new sell signal at imbalance 19 and may receive another signal at imbalance 24 this week. Even weak Nonfarm Payrolls data and the sharp increase in inflation in the European Union did not provide sufficient support for bullish traders.