EUR/USD is currently trading at 1.1514, positioned slightly above its significant two-week low of 1.1500, as market participants assess the contrasting fundamentals of the Federal Reserve and the European Central Bank. The pair experienced a decline of nearly 0.9% this week, influenced by weakening Eurozone data, increasing speculation regarding U.S. rate cuts, and uncertainty surrounding the upcoming December FOMC meeting. The euro has struggled to maintain its momentum after not being able to hold above 1.1600, with buyers now protecting the 1.15 psychological support — a threshold that has consistently acted as a pivot for central-bank and corporate transactions since 2017. The current momentum is subdued, as indicated by the RSI hovering around 49. Daily candles are consolidating within a narrow range of 1.1480–1.1580, reflecting a cautious stance ahead of significant macroeconomic announcements. Recent U.S. data and policy remarks have significantly altered short-term expectations. Last Friday, New York Fed President John Williams remarked that the existing policy is merely “modestly restrictive,” leading to a market adjustment in anticipation of quicker easing. As of November 22, Fed funds futures indicate a 71% likelihood of a 25-basis-point cut in December, an increase from 39% the previous day. Nonetheless, the hawkish remarks from Boston Fed’s Susan Collins and Dallas Fed’s Lorie Logan cautioned against premature easing, resulting in a divided Fed and elevated volatility. The U.S. 10-year Treasury yield, which surged to 4.51% earlier this month, has since decreased to 4.42%, indicating this uncertainty. The U.S. Dollar Index maintained its position following a recovery from 98.98, which corresponds to the 61.8% Fibonacci retracement of its advance from 2021 to 2022. The dollar’s strength is influenced by risk aversion associated with the Japanese yen and the prevailing carry-trade dynamics.
Meanwhile, the government shutdown has postponed critical macroeconomic data. The absence of the October employment report and the delay in inflation releases have compelled traders to depend significantly on Fed communication and market-implied expectations instead of definitive figures. The euro’s depreciation indicates the Eurozone’s sluggish macroeconomic performance. The composite PMI for November decreased to 52.4 from 53.2, indicating a return to contraction in the manufacturing sector. German factory output has declined once again, undoing the recovery efforts observed earlier in the month. Industrial production decreased by 0.4% month-over-month, and the services index showed a slight decline, indicating a disparity in demand following the summer period. The IFO Business Climate Index, scheduled for release on Monday, along with the Q3 GDP revision on Tuesday, will serve as indicators to assess the potential deepening of Germany’s stagnation. The consensus anticipates a stable reading close to 0.0% QoQ, indicating the bloc’s slight avoidance of a technical recession. The ECB continues to exercise caution. President Christine Lagarde emphasized that inflation continues to exceed the target, yet the bank faces mounting pressure as economic growth stagnates and unemployment approaches 6.5%, the highest level since 2021. Current market expectations indicate that an ECB rate cut is anticipated by March 2026, whereas the Fed’s earlier pivot may lead to an increased policy gap.
The EUR/USD structure continues to exhibit technical fragility. The pair’s consistent inability to breach the 1.1500 level indicates robust institutional interest at this price point. In the past, comparable reactions observed from 2015 to 2017 resulted in extended range trading within the 1.05 to 1.15 bracket. Resistance is observed at 1.1593–1.1656, where the 50-day moving average limits any upward movements. A breakout above 1.1660 may pave the way to 1.1720; however, the existing trendline from the September high (1.1978) continues to delineate a significant bearish channel. The lower-bound scenario presents a more pressing concern: should EUR/USD close beneath 1.1480, sellers may aim for 1.1400, with additional downside potential reaching 1.1320 — a level that corresponds with the recovery base established in 2023. Technical oscillators indicate a need for caution; the MACD is stabilizing beneath the signal line, and momentum is trailing at −0.0008, reflecting a lack of new buying momentum. The correlation with the DXY stands at −0.84, indicating that any additional strength in the dollar may swiftly lead to a decline in the euro. The NASDAQ Composite experienced a decline of 2.1% this week, highlighting the trend that tech corrections typically redirect capital towards the dollar. The recent surge of USD/JPY beyond 156.00 underscores the persistence of the yen carry trade. Even though yen weakness represents merely 13.6% of DXY weighting, its influence on global liquidity is considerable. Given that Japanese yields are sustained at high levels and carry positioning is significantly extended, EUR/USD is likely to experience indirect downward pressure due to USD inflows associated with hedging strategies.
CFTC data indicate that euro net longs decreased by 18,400 contracts in the most recent week, representing the swiftest unwinding since July. Hedge funds are exercising caution, opting for short-term positions within a limited range. The EUR/USD volatility index has risen to 7.2, marking its peak since early October, indicating a surge in speculative positioning in anticipation of macroeconomic data releases. Options pricing indicates a skew toward euro downside, as evidenced by 1-month 25-delta risk reversals at −0.45, which suggests heightened demand for dollar calls. The implied volatility for December expiries is currently at approximately 8.1%, reflecting the anticipation of policy-driven movements among traders. At 1.1514, EUR/USD is positioned within a tight range influenced by policy uncertainty and technical exhaustion. The pair is currently trading within a defined range, exhibiting downside risk toward 1.1400. However, a short covering scenario could lead to rapid rebounds toward 1.1600, particularly if the data presents unexpected results. Considering the sluggish growth in the Eurozone, ongoing disparities in interest rate paths, and the robust macroeconomic indicators in the U.S., the outlook for the medium term continues to lean bearish. The 1.1500 level remains a critical point of contention between speculative bears and corporate demand. Unless dovish signals from the Fed strengthen further or Eurozone data stabilizes above PMI 53, EUR/USD is at continued risk of a breakdown toward the mid-1.14 zone.