The EUR/USD experienced a pullback on Friday, moving down to 1.1560 after previously reaching above 1.1600, coinciding with the stabilization of the U.S. Dollar Index at $99.66. In light of a significant three-day decline in the dollar, rate markets currently reflect an 87% probability of a 25-basis-point cut at the upcoming December FOMC meeting, a notable increase from the 31% observed last week, according to the reports. The shift towards monetary easing gained traction amid speculation that Kevin Hassett, who aligns with Trump’s pro-growth perspective, might be nominated as the next Federal Reserve Chair, thereby bolstering expectations for lower rates through 2026. This sentiment maintains Treasury yields close to multi-month lows — the 10-year at 3.89% and 2-year at 4.08% — which restrains dollar volatility while also capping Euro gains as traders consider the ECB’s cautious stance on additional easing measures. The European session presented a series of varied macroeconomic releases. German retail sales decreased by 0.3% month-over-month, contrasting with expectations of a 0.2% increase. Meanwhile, import prices rose by 0.2% for the month but showed a year-over-year contraction of 1.4%, which was slightly more favorable than anticipated. Net employment increased by merely 1,000 jobs, significantly underperforming the anticipated 5,000, resulting in an unchanged unemployment rate of 6.3%. France has reported a Q3 GDP growth of 0.5%, while inflation has remained steady at 0.8%, contrary to expectations for an increase. Consumer confidence in the Eurozone has reached an 8-month high; however, the momentum is still lackluster due to ongoing structural weaknesses in the construction and manufacturing sectors.
The forthcoming German HICP report, scheduled for release at 13:00, is anticipated to increase by 2.4% year-over-year and decrease by 0.6% month-over-month. This represents a slight uptick from October’s 2.3%, yet it is unlikely to alter expectations regarding ECB policy. Market participants are closely monitoring any indications from Bundesbank President Joachim Nagel regarding potential concerns about second-round inflation effects. Despite the stabilization of the USD, its bullish efforts appear constrained as global investors foresee several rate cuts extending into 2026. The momentum of the U.S. economy has decelerated, with core PCE inflation decreasing to 2.7%, durable goods experiencing a decline of 5.4%, and indicators of consumer spending showing signs of weakness. The interplay of these factors has driven demand for risk assets and commodities, while simultaneously limiting prolonged rallies in the dollar. For EUR/USD, the situation reflects a balance of opposing influences: The reduction in Fed rates diminishes the yield attractiveness of the dollar, while a dovish stance from the ECB lessens the carry benefits of the Euro. The pair continues to be confined within the 1.1500–1.1650 range, looking for a macro catalyst to drive movement. The Euro experienced a weekly increase of 0.5%, primarily driven by dollar fatigue rather than any inherent strength of its own. Ongoing trade tensions and fluctuations in energy prices remain a significant concern for the continent’s economic forecast, while the strength of U.S. equities enhances the attractiveness of the dollar as a safe haven.
The EUR/USD pair is currently experiencing slight bearish pressure. The 4-hour RSI has dipped below 50, and the MACD has turned negative after crossing beneath its signal line, indicating a decline in bullish momentum. The price encountered resistance around 1.1600 earlier on Friday and is currently consolidating below the 50-EMA (1.1567) and 200-EMA (1.1589). A confirmed break below 1.1550 — a previous resistance zone that has now become support — may lead to an increase in losses towards 1.1500 and 1.1470, which are the swing lows from November. On the upside, only a decisive close above 1.1595 would shift the bias to a bullish outlook, targeting 1.1654 and 1.1670, with broader resistance at 1.1730. Momentum traders are closely monitoring the ascending channel bottom around 1.1420; however, this level appears unlikely to be reached unless next week’s data disappoints. The 50-EMA/200-EMA cluster remains a key indicator for intraday direction, emphasizing a stance of short-term neutrality. The U.S. Dollar Index has shown a slight recovery from the support level of $99.40, currently testing the resistance at $99.78. The 200-EMA at $99.41 serves as a crucial support level for bullish investors, as the RSI has bounced back from oversold conditions, suggesting a phase of consolidation instead of a further drop. A daily close above $99.80 could potentially pave the way to $100.38, which corresponds with October’s highs. Conversely, a failure to maintain the trendline at $99.40 may lead to a decline towards $99.00. Even with increasing expectations for Fed cuts, the dollar’s status as a global safe haven remains strong, effectively countering speculative short pressures.
Other majors demonstrate comparable reluctance. GBP/USD is currently at 1.3210, constrained by the 1.3264 trendline, whereas USD/CAD and AUD/USD exhibit limited responses despite the strength in commodities. The recent CME outage during this session caused a brief disruption in FX trading; however, liquidity conditions returned to normal within a few hours. As the New York pre-open approaches, the Euro is currently 0.3% weaker against the USD for the day, unchanged against the CHF, and 0.1% higher against the JPY, indicating a mixed risk sentiment landscape. Market participants are now focused on the upcoming Eurozone CPI, U.S. ISM PMI, and PCE inflation revisions for next week. These indicators may influence whether EUR/USD continues its modest pullback or resumes its gradual ascent above 1.16. The EUR/USD outlook appears to be neutral-to-bearish in the near term. The adjustment in Fed policy establishes a support level around 1.1500; however, the absence of growth momentum in the Eurozone limits upward movements beyond 1.1650. A breach below 1.1550 would indicate a resurgence of downward momentum, with objectives set at 1.1470–1.1420.