The EUR/USD pair is currently positioned around 1.1500, experiencing a decline for the first time in three weeks. This movement is driven by robust U.S. business data, which bolsters the dollar’s strength and highlights the inherent weaknesses of the euro. Friday’s price movement indicates a distinct turning point: the U.S. Dollar Index is firmly positioned around 100.26, reaching its peak in more than five months, whereas Eurozone metrics display inconsistent momentum despite overall strength in the headlines. Market participants are reallocating their focus to the dollar in response to changing central bank outlooks and increasing growth disparities across the Atlantic. The S&P Global U.S. Composite PMI increased to 54.8 in November, up from 54.6, marking its highest level in four months. Services increased to 55.0, surpassing forecasts, whereas manufacturing experienced a slight decline to 51.9, yet continues to indicate growth. The data indicate strong performance in the private sector, bolstered by the most rapid rise in new orders observed this year. Price pressures have resurfaced: input costs have surged at one of the quickest rates in three years, suggesting that the persistence of inflation continues to be a concern for the Federal Reserve. The University of Michigan Consumer Sentiment Index increased to 51.0, rising from 50.5, as one-year inflation expectations decreased to 4.5% and the five-year measure eased to 3.4%. The data collectively indicate a consistent consumer environment—robust enough to maintain stable U.S. demand, yet subdued enough to warrant a gradual easing in 2026.
Remarks from New York Fed President John Williams altered the discussion during the session. Williams observed that the progress on inflation has “stalled,” yet he affirmed that a rate cut in December is still a possibility, pointing to indications of a slowdown in labor and output. Despite this, there is a division among Fed officials—Philadelphia Fed President Anna Paulson and Cleveland Fed’s Beth Hammack highlighted the need for patience, asserting that policy should remain restrictive until wage pressures subside. The ongoing policy tension has maintained the DXY in the range of 100.00–100.50, limiting any significant recovery in EUR/USD. In contrast, data from the Eurozone indicate a slight yet delicate recovery. The HCOB Composite PMI decreased marginally to 52.4 from 52.5, indicating the eleventh consecutive month of expansion while reflecting a slower growth rate than anticipated. The Services PMI increased to 53.1, marking an 18-month peak, whereas the Manufacturing PMI declined into contraction at 49.7. Germany, the region’s industrial anchor, experienced a decrease in composite activity, dropping to 52.1 from 53.9. In contrast, France saw an improvement, reaching 49.9 as its services sector gained momentum. The euro’s strength is currently contingent upon the European Central Bank’s assessment of these varied indicators. The ECB’s third-quarter negotiated wage data came in at 1.87% year-on-year, falling short of the anticipated 2.45%, indicating a lack of robust income growth and weak domestic demand as we approach 2026. The ECB’s composite policy stance is currently neutral, as swaps indicate a mere 40% likelihood of an additional 25-basis-point cut in the next twelve months, in contrast to the 84 basis points of easing anticipated from the Fed during the same timeframe.
The differing paths of central banks are influencing the medium-term forecast for EUR/USD. There is a growing consensus among analysts that the ECB is nearing the conclusion of its easing cycle, whereas the Fed still has the capacity to implement cuts. The current policy divergence supports the dollar, particularly as the U.S. 10-year Treasury yield remains around 4.05%, in contrast to the German Bund’s 2.32%. While Christine Lagarde highlighted Europe’s investment potential during her address in Frankfurt, her lack of commentary on monetary policy indicated a careful approach rather than an inclination towards renewed stimulus. The currency pair is currently navigating within a narrowing range, with a significant pivot point at 1.1450 and initial resistance identified at 1.1585. Current technical indicators suggest a preference for sellers: EUR/USD continues to trade beneath the 20- and 50-day exponential moving averages, reinforcing a bearish outlook. The RSI is holding steady around 44, suggesting a lack of significant downside pressure while not indicating any potential reversal at this time. A persistent close beneath 1.1450 would pave the path to 1.1405, in line with the 200-day moving average. On the other hand, a recovery to the 1.1585–1.1650 range would serve as the initial indication that buyers have reestablished their dominance. On the 4-hour chart, consistent struggles around 1.1565 indicate a weak commitment from euro buyers, while the support level at 1.1500 stands as the last line of defense before a potential decline toward 1.1400. The DXY’s failure to surpass 100.84 may provide short-term respite; however, the overarching trend continues to indicate downward pressure for the pair. The macroeconomic gap between the U.S. and Europe persists in expanding. U.S. activity metrics continue to exceed the long-term average, whereas the eurozone is grappling with cost inflation in the absence of wage growth. Increasing input costs, particularly in manufacturing, along with weak export demand, have limited corporate margins throughout the region. As input prices surge at the quickest rate since March, while output inflation dips to a one-year low, companies find it challenging to transfer costs to consumers. Business sentiment has shown a slight uptick, yet it continues to fall short of the levels seen prior to 2024.
Recent positioning data indicates that speculative traders have decreased their net euro longs by 16% compared to the previous week, while U.S. dollar positioning has shifted to net long for the first time since July. Asset managers are adopting a cautious stance on Europe, pointing to ongoing underperformance in Germany’s industrial orders and a structural disadvantage in energy costs. Central-bank flows are currently advantageous for the dollar, as reserve rebalancing is shifting towards U.S. Treasuries. This trend is driven by global funds in search of yield and liquidity in the face of geopolitical uncertainty. The EUR/USD pair is currently positioned at 1.1500, encountering a significant technical challenge not seen since early October. The short-term outlook is negative, with potential declines targeting the 1.1450–1.1405 range if U.S. economic indicators keep showing strong performance. Nonetheless, the euro’s decline could ease in December if the Fed announces a rate cut—an occurrence that might briefly push the pair up to the 1.1600–1.1650 range. The market is currently exhibiting a clear divide influenced by contrasting policy indicators. Currently, EUR/USD is influenced by macroeconomic disparities: a strong U.S. economy, a robust dollar, and a fragmented recovery in Europe. A significant shift in policy from the Fed, or an unexpected increase in Eurozone manufacturing, is required to alter the prevailing downward trend.