EURUSD hits 17-month low! Where are the opportunities?

• EURUSD hits 17-month low; euro weaker against all G10 peers so far this month (Oct 2026)

• Euro dragged down by political risks and weak government finances among euro area members

• US Dollar boosted by expectations of more Fed rate hikes, weighing down EURUSD

• Bloomberg model's 1-week forecast: 77% chance EURUSD trades between 1.110 - 1.130

• Bloomberg model's 1-month forecast: 77% chance EURUSD trades between 1.100 - 1.145

• 3 Opportunities (not financial advice): (1) Go long, (2) go short - either with EURUSD CFD or FX perps; (3) rotate into USD assets (to capture potential USD gains and yields)



EURUSD is now at its lowest levels since May 2025!



Note that the euro accounts for about 29% of all trades in an FX market that sees US$ 9.6 trillion change hands per day, according to the Bank of International Settlements (BIS).

Here's some more context to the recent performance of the world's most-traded currency pair:

• -4.5% so far in 2026 (year-to-date)

• -1% so in October 2026 (month-to-date)

The euro is also the worst-performing G10 currency against the US dollar so far this month:



Furthermore, the euro has also weakened against all of its G10 peers on a month-to-date basis:

READ MORE (published Mon, Oct 5th): EURUSD chosen among "3 Assets to Watch" after hitting 17-month low



How Does EURUSD Work?



EURUSD represents the euro vs. the US dollar; there are 2 sides of this FX pair to consider.

• EURUSD prices go up when the euro strengthens vs. USD, and/or US dollar weakens against the euro

• EURUSD prices go down when the euro weakens vs. USD, and/or US dollar strengthens against the euro



Why is EURUSD falling?



1) Europe's rising political and fiscal risks

As also shared in our Market Pulse report, published on Monday, October 5th, EURUSD has fallen to its weakest levels in 17 months, dragged down by rising concerns over:

• political risks in Spain and France (Spain has called for a snap election on Nov 29th, 2026)

• weak government finances (fiscal) among euro area members, including France, Italy, and Belgium

NOTE: A currency tends to weaken when its region faces political instability, prompting investors to pull money out and park it in safer places, like the US dollar.



2) Fed vs. ECB Interest Rate Differential

Currently, here's what markets are forecasting for each of these major central banks:

• US Federal Reserve a.k.a. The Fed = 3 more rate hikes fully expected (current: 3.75% - 4%)

• European Central Bank (ECB) = 2 more rate hikes fully expected, 73% chance of a 3rd hike (current: 2.5%)

A currency tends to strengthen at the thought of its country's interest rates moving higher than its peers.

Hence, with US interest rates higher and potentially rising faster, no surprise that the US dollar is stronger vs. the euro i.e. EURUSD tumbling.



3 Key Factors to Watch



1) Oil's reaction to Middle East developments

Higher oil prices may mean more Fed rate hikes at a quicker pace, which could boost the US dollar further while dragging EURUSD lower.



2) Next Fed and ECB rate decisions: Oct 28-29

• Next Fed rate decision = October 28th

• Next ECB rate decision = October 29th

Currently, markets do not expect a rate hike by either of these influential central banks this month (only 10-20% chance).

However, EURUSD is bound to react to what the Fed and the ECB each say about the potential timing of their next rate hike respectively.



3) France and Spain's political/fiscal development

France already has one of the biggest budget deficits (government spends more than it earns) in the euro area (debt-to-GDP ratio of 117.6%). And as mentioned earlier, Spain's snap elections loom large.

Further developments on either front that fuels market concerns may drag EUR even lower.



What's Next for EURUSD?



According to Bloomberg's FX models, these are the forecasted trading ranges (77% chance) for EURUSD over the following periods:

• Next one week (Oct 9th-16th): 1.110 - 1.130

• Next one month (through Nov 11th): 1.100 - 1.145

Should EURUSD fall to 1.100 by November 2026, that would mark its lowest prices since April 2025 - a 19-month low!



EURUSD: 3 Opportunities



• Buy the dip

Traders and investors who believe that the euro is due for a rebound may be enticed by the "cheapest" EURUSD prices in 17 months.

Trade EURUSD perps now



• Go "short"

Traders who believe that the euro could weaken further against the dollar over the near term could go "short" (tap on "Sell" button first).

Trade EURUSD CFD now



• Pivot into USD assets (and earn potential yields)

US assets are now in vogue - from US stock indexes hitting record highs, to the US dollar on a winning streak.

At the time of writing, the Dollar Index (DXY) is about to post its 4th straight weekly advance - its longest winning streak since March.

As mentioned earlier in this report, with US interest rates set to go higher, investors can potentially take advantage of the greater differential, while potentially enjoying further USD gains as well.

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DISCLAIMER: This article is provided for general information purposes only and does not constitute investment advice, nor an offer or solicitation to buy or sell any financial instruments or digital assets. Past performance is not indicative of future results. Your ability to access or use any products or services mentioned may be subject to the laws and regulatory requirements of your jurisdiction.