EUR/USD has been declining for seventeen consecutive days, apart from several minor pauses. During this period, the euro has lost 440 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 based on the Fed's hawkish monetary policy stance, which has already been contradicted several times by FOMC policymakers. Many Fed officials have openly stated that further monetary tightening is necessary, while at the same time providing no specific guidance on the pace of tightening. The latest dot plot showed that another 0.25% rate hike should be expected. This week, New York Fed President John Williams said that the Federal Reserve should not rush into further policy tightening. Has the dollar become too expensive for two rate hikes, especially when the timing of the second hike remains uncertain? The dollar is currently rising as if the Federal Reserve had shifted from a completely neutral stance to an ultra-hawkish one, with the market having no reason to expect such a scenario. In reality, however, monetary easing could begin as early as 2027, as Fed policymakers themselves have stated that the impact of high oil prices will be limited in duration. The same applies to the impact of Donald Trump's trade tariffs. Today's data deserve particular attention. The Nonfarm Payrolls report and the unemployment rate came in not merely below forecasts but significantly below expectations, causing the dollar to decline by 30 points.

Nothing is currently able to stop the euro's decline. Neither tighter ECB policy, nor positive economic data from the European Union, nor disappointing US labor-market data, nor the technical picture and bullish patterns have been sufficient. With imbalance 19 invalidated, the European currency now has every chance of falling below the psychological level of $1.10. Bullish imbalance 19 has turned into a bearish inverted imbalance and generated a sell signal. The bulls failed to capitalize on bullish imbalance 19, failed to hold above two bullish swings, and failed to benefit from disappointing US labor-market data. Nothing will help the euro if traders simply continue to buy the dollar.

Last week, the FOMC indicated its readiness to continue tightening monetary policy, which proved sufficient to extend the broad bearish move. Even after the Fed tightened monetary policy in September and potentially tightens again in October or December, what other factors could cause traders to continue buying the US currency? The dollar has indeed performed strongly in recent weeks, but what factors have supported it during this period? FOMC monetary tightening and nothing else?

Overall, the fundamental backdrop remains supportive of the bulls. Although the Fed has adopted a more hawkish monetary policy stance, it is not the only factor affecting exchange rates. US Treasury yields remain at elevated levels, placing significant pressure on the federal budget. The US economy has slowed in recent quarters, while US labor-market data have more often disappointed than exceeded expectations. Donald Trump resumed trade and other disputes with numerous countries in 2026. The US stock market also continues to raise concerns over highly leveraged investment in technology companies involved in AI development.

The current technical picture indicates that bearish momentum remains intact. There are currently no valid patterns, either bearish or bullish. However, the current week could end with the formation of a new bearish imbalance. The bulls currently have no identifiable technical patterns, even on a theoretical basis.

Friday's economic backdrop gave the bulls an opportunity to launch a strong counterattack. Not only did the Nonfarm Payrolls report and the US unemployment rate come in significantly worse than market expectations, but euro-area inflation also rose more than expected. Three of the most important reports were supportive of the European currency. Yet all the bulls managed to achieve was a marginal rise in the euro, which did not even offset the previous day's decline.

The bulls still have numerous reasons to mount an attack in 2026. Structurally and globally, Trump's policies, which led to a significant decline in the dollar last year, have not changed. At present, there are no significant factors supporting the US currency despite the FOMC's hawkish stance. Geopolitical developments, which supported demand for the US currency for most of the first half of 2026, are no longer having the same effect.

US and European Union Economic Calendar:

• European Union – Producer Price Index (09:00 UTC).
• US – ISM Services PMI (14:00 UTC).

On October 5, the economic calendar contains two entries, of which the ISM index stands out as the most important one. The economic backdrop will affect market sentiment during the second half of Monday's trading session.

EUR/USD Forecast and Trading Recommendations:

The pair remains in the process of forming a bullish trend that has paused for an entire year. The fundamental backdrop shifted sharply in favor of the bears seven months ago, but the broader trend, which has lasted for four years, cannot be considered canceled or complete. In the long term, the pair can be described as trading within a range. A range does not invalidate the broader bullish trend. Thus, the bulls could resume their advance in 2026, but there are currently no real opportunities to do so. The bears have received a new sell signal from imbalance 19, and another bearish imbalance could form this week. Even weak Nonfarm Payrolls and a sharp rise in euro-area inflation have failed to support the bulls.