EUR/USD Forecast: Euro Drops to Test a Big Figure on Tuesday – 18 February 2026

The euro continues to drift a bit during the trading session on Tuesday, as the oversold condition in the US dollar is starting to get a bit overdone. At this point, the short interest in the USD is at 14-year highs, and could we be ready to see a reversal?

EUR/USD

The US remains resilient and the dollar is catching a bid from the higher for longer interest rate narrative following sticky inflation expectations. Because of this, you’ll have to keep an eye on the PCE inflation figures later in the week. This is one of the favorite gauges the Federal Reserve uses to determine monetary policy in the USA.

The Eurozone faces some headwinds, with the sentiment in the Eurozone being a bit fragile. Industrial giants like Volkswagen have recently signaled massive cost cutting and potential plant closures, highlighting the structural economic pain that can be found in Germany.

Geopolitical Factors and Technical Outlook

There’s also a lot of geopolitics going on, with keeping an eye on the US talks with Russia and Ukraine starting today in Geneva. Any hint of a stalemate in this could trigger off a risk-off move which generally will favor the US dollar. That being said, the opposite is also true, and it won’t be until after the meeting that we have an idea as to where things could go on that front.

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Watch the 50-day EMA. If we were to break down below that, then I think you have more negativity coming. If we turn around and recapture the 1.19 level, it could send the euro looking to reach the 1.20 level again and maybe after that the protracted target of 1.23 based on the previous consolidation and the measured move that has accompanied it. If we get that move, I suspect that the USD will be in trouble everywhere.

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