The EUR/USD has ascended into the 1.1615–1.1630 range following a breach of a resistance level that had held the pair back for several weeks. This movement was propelled by a U.S. Dollar that experienced immediate weakening after the conclusion of a 43-day government shutdown, marked by a close 222–209 vote in the House. The recent signature from President Trump has removed the political risk premium that had been propping up demand for the USD, compelling traders to reverse their defensive long-dollar positions established during the crisis. EUR/USD momentarily exceeded 1.1630, marking its peak since late October, before adjusting in anticipation of a series of postponed U.S. reports—many of which the White House cautioned might not be published, including October CPI, payrolls, and PCE. The absence of data has resulted in the USD trading without its main valuation support, allowing EUR/USD to continue its multi-session recovery despite Eurozone fundamentals falling short of expectations. The most recent private-sector employment data indicated that U.S. employers reduced their workforce by 11,250 jobs weekly in late October. Additionally, Challenger layoffs experienced a significant increase, more than doubling from the previous month—a trend consistent with the official NFP report, which revealed an addition of only 80,000 jobs, considerably under the anticipated figures. The aggregation of these data points significantly elevated rate-cut expectations earlier this week; however, the reports now reflects a variable level of conviction: the likelihood of a 25-bps cut in December decreased from 67% to approximately 54–60% due to mixed messages from Fed officials. Governor Miran contended that the policy is “too restrictive,” attributing the labor weakness to elevated real rates. In contrast, Raphael Bostic responded that more significant cuts could “feed the inflation beast,” emphasizing that the labor market is in a “curious balance.” This disconnect has emerged as a direct catalyst for EUR/USD volatility, with traders factoring in an increasingly uncertain U.S. curve, while the Euro benefits from a more stable position due to a unified ECB stance.
Despite Europe’s macro signals underperforming, EUR/USD maintained an elevated position due to a more pronounced deterioration of the USD. In September, Eurozone Industrial Production experienced a growth of 0.2%, following a decline of 1.1% in August. This growth fell short of expectations, which anticipated a monthly increase of 0.7% and an annual gain of 2.1%. The German HICP remained steady at 0.3% MoM and 2.3% YoY, marginally lower than the previous figure of 2.4%. Similarly, the German CPI recorded a 0.3% increase, with the YoY rate easing from 2.4% to 2.3%. The ZEW survey decreased from 39.3 to 38.5, indicating a decline in sentiment. Nonetheless, the ECB’s unwavering stance—emphasizing that current rates are “absolutely appropriate”—offered a stability that stands in stark contrast to the Fed’s inconsistent internal communications. As the defensive positioning of the dollar unwinds, even subpar data from the Eurozone fails to counteract the underlying pressure on the USD, enabling the EUR/USD to continue recovering its previous losses. The price action indicates that EUR/USD is steadily breaking down the descending channel that has constrained each breakout effort since early October. The pair regained the 20-day EMA at 1.1584 and subsequently moved towards the confluence zone where the 50-day EMA and the 38.2% Fibonacci retracement of 1.1822–1.1386 converge around 1.1619. A consistent daily close above 1.1620 paves the way to 1.1670, with the next target being the October 17 swing high around 1.1730.
The RSI exceeding 60 indicates a robust bullish momentum while avoiding signs of exhaustion. The Parabolic SAR has transitioned to a bullish signal for the first time since late October. On the downside, buyers remain committed to defending 1.1575, with additional support levels at 1.1540, 1.1500, and the crucial 1.1470 level that established November’s base. Provided that EUR/USD remains above 1.155, the overall rebound structure continues to hold firm. The reopening of the U.S. government has provided a temporary boost to sentiment; however, the lack of October economic data leaves markets without clarity regarding inflation and employment trends as we approach the December FOMC meeting. The likelihood of rate cuts continues to hover between 54% and 60%, as futures markets indicate a significant risk that recessionary pressures may compel the Fed to consider easing, notwithstanding Bostic’s opposition. Meanwhile, ECB officials present a consistent stance, bolstered by stable Eurozone inflation, despite the ongoing cooling of growth momentum. The macro divergence is evident in the heat-map: EUR appreciated by 0.13% against USD, 0.16% against JPY, and 0.11% against CAD, while it only lagged behind AUD. The pair is currently positioned within a 1.145–1.172 accumulation corridor that has been established since early November.
The lack of U.S. October CPI, PCE, and payroll data removes the essential support for the Dollar at a critical time—amidst deteriorating labor conditions, differing viewpoints among officials, and increasing anticipation for a policy change in December. The EUR/USD pair is supported by an ECB that perceives no necessity for easing, a Eurozone inflation rate stabilizing around 2.3%, and a technical breakout that is progressively developing. Market participants are closely monitoring the addresses from Kashkari, Musalem, and Hammack for insights. However, unless the Federal Reserve indicates a return to a more aggressive stance, the EUR/USD pair is likely to trend upward toward the 1.1669–1.1730 range. With support remaining firm at 1.1575 and 1.1540, the pair is positioned to favor appreciation over reversal.