Euro Slips to 17-Month Low Against Dollar as European Pressures Mount

Against the US dollar, the euro has sunk to its lowest level in 17 months. On Oct. 5, EUR/USD reached 1.1161, the weakest reading since May 2025.

Over the last five weeks, the pair has given up more than 3% and was trading near 1.1182 on Monday. More and more analysts describe the drop as a euro problem, not a dollar story.

What Explains the Euro's Persistent Decline Against the Dollar

The single currency is under four pressures at the same time.

KBC says euro weakness, not dollar strength, is now the main driver. The selloff began in mid-September with a hawkish Federal Reserve (Fed) and was then extended by Europe's problems.

France is the focal point. The French-German 10-year yield spread has blown out to a size not seen since the 2012 debt crisis, with investors skeptical about the 2027 budget.

The strain is spreading as well. Italy intends to widen its deficit, and Spain is heading for a snap election on Nov. 29.

French bond spread up, euro down!
EURUSD now below 1.12.
But France still won't default.
This is not disorderly enough for the ECB.
So the euro will take the hit.
Pushing up inflation.
So what about your savings account earning 1-2% yield?

— jeroen blokland (@jsblokland) October 7, 2026

In the meantime, the Fed increased rates in September and has telegraphed another hike before the year ends. A weak payrolls reading of 29,000 jobs managed to lift the euro for only a day.

The European Central Bank (ECB) has little to offer. It had already started raising rates again, yet officials have since downplayed an October move. At the same time, Brent crude above $100 is pushing inflation higher while threatening growth.

“The euro hasn’t been able to get traction.”

Jane Foley, head of FX strategy at Rabobank, was quoted via Vantage.

EUR/USD Support Near 1.11 Faces a Test

From a weekly perspective, the euro was turned back from the 1.18 resistance zone. The pair is now heading for the 0.382 Fibonacci retracement at 1.1110, a level that once acted as resistance and became support in May 2025.

Should that level give way, 1.08 would be the next stop. Under that is the 0.618 golden pocket at 1.0509, while an ascending trendline from 2022 reaches up toward the 1.07 area.

The Relative Strength Index (RSI) is at 34 and continues to decline. It is, however, approaching a support line that has held since 2022. A rebound from that level could pull the euro back higher against the dollar.

The daily picture is even more bearish. Since January, the pair has been recording lower highs and lower lows within a descending parallel channel.

The 20-day moving average has repeatedly pushed back attempts to climb above it, and each rejection has produced another lower high. The average has not been retested since September and is now near 1.13, around the channel's midline. The next test, if it comes, could easily end in another rejection.

Near 1.10, slightly under the 0.382 Fibonacci level, is the channel's lower band. The euro could keep sliding for as long as the trend remains bearish.

Bank forecasts are divided. MUFG projects 1.10 should French spreads continue to widen; ABN AMRO, meanwhile, is targeting 1.15 by the end of the year. What happens next may hinge on US inflation data on Oct. 14 and Federal Reserve and ECB meetings on Oct. 28 and 29.