The EUR/USD pair is currently stabilizing around 1.1600, marking its fourth consecutive day of gains. This trend is driven by a notable weakness in the U.S. Dollar and the differing monetary policies of the Federal Reserve and the European Central Bank. The euro’s rise from last week’s 1.1460 lows has emerged as one of the most notable short-term reversals since mid-September, influenced by a combination of weaker U.S. macroeconomic data, dovish remarks from the Fed, and steadily anchored expectations for European rates. The U.S. Dollar Index has decreased to 99.48, marking its lowest point in more than a week, as market participants assign an 85% likelihood to a rate cut in December, indicating a significant shift toward easing measures. Despite a better-than-expected rise in U.S. Durable Goods Orders (+0.5%) and a drop in Initial Jobless Claims (216,000), markets continue to overlook U.S. growth momentum, instead concentrating on the significant decline in the Chicago PMI to 36.3, which indicates a severe contraction in manufacturing activity. The varied indicators support the notion that the Federal Reserve’s forthcoming action is likely to involve a 25 basis-point cut, which may be succeeded by additional reductions in 2026. The recent minutes from the ECB have confirmed the conclusion of its easing cycle. Vice President Luis de Guindos stated that the current rates are “appropriate,” while Chief Economist Philip Lane noted that any further cuts would only be warranted if inflation significantly drops below the target.
The ECB’s deposit rate is currently set at 2.0%, with policymakers indicating that no adjustments are anticipated through the next year. In contrast, the Federal Reserve’s stance has shifted, as New York Fed President John Williams and Governor Christopher Waller both indicated a willingness to consider earlier cuts. Speculation surrounding Kevin Hassett, a recognized policy dove and former advisor to Trump, potentially succeeding Jerome Powell upon the expiration of his term in 2026 has intensified the dovish sentiment, leading to a repricing in the bond and FX markets. The 10-year U.S. Treasury yield has decreased to 3.95%, marking the lowest level since early November. This shift has narrowed the EUR/USD yield differential to 145 basis points, down from 178 basis points two weeks prior, serving as a significant driver for euro strength. Recent European data indicate a slight stabilization instead of a resurgence of weakness. The European Commission’s Consumer Confidence Index remained unchanged at –14.2 in November, whereas Services Sentiment saw an increase to 5.7 from 4.2 in October. The German GfK Consumer Climate experienced a slight increase, moving from –24.1 to –23.2, indicating initial signs of improvement in spending intentions. Nonetheless, Industrial Confidence declined to –9.3, indicating ongoing challenges in the manufacturing sector. Despite the mixed signals, the region’s consistent inflation trend and the ECB’s decision to pause indicate a belief that price stability is reemerging without hindering growth.
Currently, EUR/USD is experiencing a narrow consolidation within the range of 1.1580 to 1.1620, with the 200-day Simple Moving Average acting as a significant resistance level. The 50-day EMA is positioned at 1.1589, highlighting the significance of this zone. A break and daily close above 1.1625 may initiate a move towards 1.1655 (the 0.618 Fibonacci retracement) and 1.1728, which is a significant resistance level for October. The RSI (61) indicates robust buying momentum, and the MACD continues to exhibit a bullish trajectory above zero. On the downside, short-term support is identified at 1.1550, with subsequent support at 1.1500 — the level that delineated the bottom of the November correction. Below that, 1.1470 stands as the final barrier prior to the descending channel floor at 1.1420. The Thanksgiving holiday has reduced liquidity, dampening intraday volatility, yet the prevailing sentiment continues to be significantly unfavorable towards the dollar. Institutional traders are reallocating their short-term positions towards the euro, expecting the dollar to continue underperforming as the year concludes. According to CFTC data, there has been a 7.8% rise in net long positions for the euro, while leveraged funds have decreased their USD holdings for the third consecutive week. Simultaneously, the volatility compression observed earlier in November is starting to reverse. Bollinger Bands on the four-hour chart are expanding once more following a period of contraction, which has historically indicated an impending sharp breakout phase. The pattern indicates that the EUR/USD may experience a directional expansion once 1.1630 is breached — with 1.1655–1.1728 identified as the likely target range.
The overall macroeconomic landscape indicates sustained strength for the euro. The decrease in DXY aligns with robust performance in equities and commodities. The S&P 500 rose 0.69% to 6,812.61, the Dow Jones gained 0.67% to 47,427.12, and Nasdaq advanced 0.82% to 23,214.69, led by Nvidia +1.37%, AMD +3.93%, and Broadcom +3.26%. The current risk-on environment has diminished the demand for safe-haven assets like the dollar, which in turn has provided support for the momentum of EUR/USD. Meanwhile, WTI crude declined to $69.80 per barrel, which may reduce inflationary pressure and strengthen expectations of a Federal Reserve pivot. Declining oil prices generally benefit European importers and enhance the eurozone’s terms of trade — an additional subtle support for the single currency. Risk sentiment showed signs of improvement following the resumption of peace talks between Russia and Ukraine, alongside some initial progress in communications between the U.S. and China. The resulting increase in global equity flows redirected capital from safe dollar positions. Consequently, the USD/JPY declined to 149.30, whereas EUR/JPY appreciated by 0.18% to 170.92, indicating a coordinated shift in risk towards the euro complex. The euro continues to exhibit moderate strength compared to other major currencies. Throughout the week, EUR/USD has increased by +0.83%, EUR/GBP has risen by +0.35%, whereas EUR/CHF remained unchanged. The euro’s strength against the New Zealand Dollar (+1.17%) and Australian Dollar (+0.35%) highlights the market’s inclination towards liquidity in the context of Fed-induced volatility compression. With the Fed’s dovish tilt gaining traction and the ECB maintaining stability, EUR/USD shows a distinct bullish trend as we approach early December.
Provided the pair remains above 1.1550, the momentum suggests a continuation towards 1.1655, and possibly 1.1728, where a more extensive breakout confirmation could take place. Although limited holiday liquidity may amplify short-term fluctuations, the fundamental framework supports ongoing euro strength. Unless a macro shock alters Fed rate expectations, EUR/USD continues to be a Buy, with a short-term target set at 1.1655 and a medium-term extension aiming for 1.1730 — indicating the peak of the three-month descending channel and the crucial inflection zone for the trajectory leading into the end of 2025.