The EUR/USD pair is currently navigating a particularly intricate phase in 2025, positioned around 1.1630 following a turbulent ascent from the earlier breakdown attempt at 1.1500 this month. At this juncture, various elements of price movement across equities, the DXY, Federal Reserve positioning, Eurozone data, and cross-currency flows are converging on the pair simultaneously. The euro’s rise to 1.1655 this week was not powered by Eurozone strength but by a weakening USD struggling to reclaim its structural levels, specifically the 99.40 threshold on the DXY that continues to function as the global dividing line between dollar stability and renewed dollar weakness. The pair’s recovery commenced promptly after EUR/USD could not maintain the break below 1.1500, and that reversal served as the catalyst for a wider sequence of higher highs and higher lows that now extends from 1.1500 to 1.1655. The current mid-range pivot is positioned at 1.1593, a Fibonacci level that has transitioned from resistance to a potential higher-low anchor. The U.S. Dollar Index has emerged as the underlying force behind each EUR/USD fluctuation, with the DXY’s rejection from 100.25 and its subsequent inability to reclaim 99.40 on the higher timeframes providing the necessary space for EUR/USD to establish this entire bullish micro-structure.
The USD made an attempt to dip lower towards 98.90 last week, but bounced back too soon and subsequently stalled below 99.40. This situation has left traders without a clear dollar trend, compelling them to navigate the pair through short-term imbalances rather than relying on stable macro flow. Above the DXY, there exists an incomplete buy-side inefficiency in the range of 100.50 to 100.80, areas that could swiftly realign EUR/USD if they are approached. The situation is straightforward: should the dollar reclaim 99.40, the momentum for EUR/USD will immediately diminish, revealing levels at 1.1600, 1.1593, and subsequently the more significant range of 1.1575–1.1530. If the DXY remains capped, EUR/USD may continue to press upward toward 1.1668, 1.1686, and 1.1717, which are three layered levels that outline the resistance structure of the pair. EUR/USD shows initial bullish characteristics on shorter timeframes; however, the pair has yet to completely reverse the overarching downtrend that commenced in September. The 1.1660 zone serves as a pivotal reference point: it represents a multi-month point of control, a previous resistance level, and the precise threshold where bullish trend validation gains credibility.
EUR/USD exhibited prolonged trading activity around 1.1660 from July to November, establishing this level as a critical psychological and structural pivot of significant relevance. The September low at 1.1608 transitioned from resistance to support last week, establishing the foundation of the latest rally; however, without a decisive break above 1.1660, buyers are assertive yet unverified. Above 1.1660, the pair must still overcome 1.1668, 1.1686, 1.1717, and 1.1748, a formidable barrier of chart history that has thwarted bullish efforts in previous months. The EUR/USD pair is experiencing advantages due to a distinct macroeconomic distortion resulting from the lag in U.S. economic data releases. The extended government shutdown has delayed crucial indicators like CPI, PPI, and NFP, compelling traders to navigate with incomplete data as speculative movements overshadow fundamental reasoning. The recent significant U.S. indicator—the 3.1% CPI reading from November 12—dipped slightly, sparking speculation regarding potential rate-cut timelines, even as Fed officials maintain a decidedly hawkish stance. The gap between market expectations and the official stance of the Fed has reached its most significant point since early 2024 as volatility premiums continue expanding. The increase of the VIX from 14 to 17 over the span of ten days indicates that volatility premiums are expanding. This growing uncertainty has led to the implementation of strategies like EUR/USD long straddles for December expiries and call spreads aimed at the 1.1670–1.1730 range, which indicate the extent to which traders are preparing for a breakout past the constrained 1.1600–1.1650 range. The imminent publication of delayed U.S. economic data will either confirm the euro’s recent robustness or diminish it significantly within a week.
The positive momentum of EUR/USD is indirectly bolstered by cross-flows observed in the EUR/JPY and USD/JPY markets. The EUR/JPY pair has reached unprecedented levels, approaching the 180.00 psychological threshold, following an extended period of significant yen depreciation and robust euro strength. The yen’s depreciation commenced following the USD/JPY reversal from 140.00 in April, subsequently rising to 155.00, marking its peak in nine months. In contrast, EUR/JPY exhibited stronger performance due to the stabilization of European monetary policy, while Japan continues to face challenges in tightening its own policy. When the yen experiences significant weakening, capital flows tend to favor EUR/JPY over USD/JPY. The upward trajectory of EUR/JPY, characterized by its higher-low structure, is supported by key zones at 178.57–178.82, 177.86–178.07, and 177.00–177.24. This dynamic continues to foster an upward flow for the euro, providing indirect support for EUR/USD amid periods of weakness in the USD. At the macro-European level, incoming economic releases present a varied landscape: industrial output shows persistent weakness, producer prices are on a downward trend, and employment growth has come to a standstill. Yield spreads between German bunds and U.S. Treasuries continue to favor the euro, providing medium-term support during dips and enabling the pair to maintain stability above 1.1600, even amid negative sentiment. Last week, risk aversion caused a temporary decline in EUR/USD from 1.1655 to 1.1621; however, the pair swiftly recovered as traders continue to doubt the Fed’s commitment to a restrictive policy extending into 2026. The forthcoming addresses from Vice President Luis de Guindos, along with mid-week inflation figures and preliminary PMIs, will play a crucial role in determining whether the euro can maintain its current path or revert to the 1.1580 level.
The technical landscape indicates that EUR/USD is approaching its compression ceiling. The breakout on the lower timeframe from the falling wedge structure has proven resilient through multiple re-tests. The RSI is approaching overbought levels, indicating potential short-term fatigue; however, the overall structure remains solid as long as the levels of 1.1600 and 1.1593 are not breached. Resistance is closely positioned above at: 1.1660, 1.1668, 1.1686, 1.1717, and 1.1748, with each level reflecting multi-month swing points and Fibonacci confluence. The pair is currently positioned above its reverse trendline, consolidating in the range of 1.1650–1.1670, and a bullish continuation is contingent upon achieving a definitive daily close in this area. Should a break not occur, EUR/USD is likely to retreat to the 1.1580–1.1610 range prior to the volatility introduced by next week’s data releases. Positioning data and market behavior indicate a market segmented between call buyers aiming for 1.1730 and put buyers targeting 1.1575–1.1530. The comprehensive analysis of technical indicators, macroeconomic factors, cross-flow dynamics, and volatility metrics indicates a BUY recommendation for EUR/USD. The pair is currently positioned above key structural levels at 1.1593, maintaining its stance above 1.1600. This movement is buoyed by a weakening USD, which is facing challenges at the 99.40 resistance level. The dynamics are further enhanced by EUR/JPY capital flows and supported by yield differentials, setting the stage for a potential breakout as pending U.S. data is addressed. The trajectory towards 1.1686, 1.1717, and 1.1748 continues to be preferred as long as EUR/USD stays above 1.1600.