The EUR/USD pair was seen trading between 1.1550 and 1.1565 during Monday’s European session, reflecting a period of consolidation after three sessions marked by volatility due to U.S. fiscal developments and mixed macroeconomic data. The euro held steady against the U.S. dollar despite progress in Washington towards ending the historic government shutdown, a political shift that had initially strengthened the greenback. The day’s price range shows that EUR/USD is caught in a struggle, balancing short-term dollar strength with underlying euro support, shaped by varying central bank expectations and steady European macro performance. The pair’s recovery from last week’s low of 1.1490 took place with some short covering; however, momentum remains limited by resistance levels near 1.1580–1.1620, where the 20-day exponential moving average and key Fibonacci retracement clusters intersect. The U.S. Dollar Index is currently stabilizing around 99.60, as traders weigh the implications of soft U.S. data against the dovish stance of the Federal Reserve. Meanwhile, the European Central Bank maintains a firm stance, leading to a fragile equilibrium that defines the range-bound trading seen this month.
The U.S. dollar saw a brief rise following the Senate’s 60–40 vote supporting a bipartisan deal to reopen the federal government, suggesting a short-term easing in the political environment. Nonetheless, the initiative experienced a decline in momentum after the publication of recent U.S. macroeconomic data that suggested growing economic fragility. The University of Michigan consumer sentiment index saw a notable decrease, falling to 50.3, which was under the expected 53.0, marking its lowest level in three and a half years. At the same time, inflation expectations rose to 4.7%, compared to the earlier figure of 4.6%. The blend of low confidence and ongoing inflation has reinforced the view that the Federal Reserve’s cycle of tightening has peaked. Market-implied probabilities derived from Fed funds futures suggest a 65–70% chance of a rate cut in December, with expectations for two more cuts anticipated in early 2026. The 10-year Treasury yield has stabilized around 4.11%, a decrease from last week’s 4.25%, highlighting the trend of declining real yields. The USD’s struggle to extend its gains, despite positive fiscal sentiment, suggests that traders are recalibrating their views on growth risks instead of political factors. The gentle data, along with the accommodating remarks from Fed officials Jefferson and Williams, is reinforcing anticipations for a change in monetary policy towards relaxation. This environment limits additional dollar gains and indirectly supports EUR/USD above 1.15.
The European Central Bank continues to hold its position on not implementing early rate cuts, emphasizing that the advancements in inflation remain “uneven.” The current market pricing suggests a likelihood of under 50% for an ECB rate cut before September 2026, emphasizing a significant difference from Fed expectations. This policy gap is contributing to the euro’s decline, even with the persistent volatility in the wider risk landscape. The Eurozone data, while slow, shows a certain level of stability. The Sentix Investor Confidence Index for November has demonstrated an uptick, increasing to -3.9 from -5.4, marking a third straight month of recovery. German and French trade balances displayed a minor shortfall compared to expectations; nonetheless, services activity and industrial output remain within growth-oriented levels. The region’s current account surplus continues to offset trade pressures, keeping EUR/USD above 1.15 despite occasional strength in the dollar. The ECB’s careful approach is intentional — decision-makers are wary of hasty easing that could potentially spark inflation in energy-sensitive countries like Germany and Italy. This firm caution sharply contrasts with the Fed’s more lenient approach and is vital for upholding the euro’s credibility, even in a risk-averse environment.
At present, EUR/USD is trapped in a downward channel that has guided price action since September. The pair could not break through the upper limit near the 50-day EMA, which strengthens the ongoing short-term bearish trend. The 0.382 Fibonacci retracement level, located between 1.1530 and 1.1550, remains a strong support area, attracting ongoing dip-buying activity. The 20-day and 50-day EMAs are both showing a downward trend, while the Parabolic SAR is situated above the current price, suggesting that sellers are in charge of the short-term movement. The Relative Strength Index at around 45 suggests a neutral stance — it hasn’t entered oversold territory but is presently stabilizing after a prolonged decline. The crucial area for bullish movement is marked between 1.1580 and 1.1620, aligning with the 0.50 Fibonacci retracement and the upper limit of the channel. A steady close above this level could lead to a shift toward 1.17, followed by 1.1820, marking the July swing high. A significant close beneath 1.1525 would expose the 200-day EMA at 1.1405, aligning with the structural support from the April uptrend. The resolution of the U.S. shutdown offered quick relief in global markets; however, it also reintroduced inflation and debt worries that lessen the appeal of the USD. Fiscal expansion and renewed Treasury issuance — estimated at $125 billion this week — are expected to put pressure on long-term yields, which may lead to a decline in the dollar’s strength.
Currently, market participants are being careful as they prepare for upcoming announcements from the Fed and ECB. Upcoming speeches from FOMC members Daly and Musalem, along with the Cleveland Fed inflation expectations survey (previously recorded at 3.5%), may set the tone for the dollar’s next move. In Europe, ECB officials continue to emphasize “data dependency,” keeping a flexible rate outlook that is more stringent than what is anticipated in the U.S. Market positioning reflects this uncertainty: speculative longs in the euro have seen a slight decline, while short positions are still limited, suggesting that traders are reluctant to make strong commitments to either side until a macro catalyst breaks the current stalemate. As EUR/USD steadies, other major currency pairs suggest a shift in the dollar’s momentum. The GBP/USD pair is presently around 1.3159, encountering difficulties in its efforts to rise higher. Meanwhile, the USD/JPY is nearing the 154.00 level, reflecting yen weakness amid the Bank of Japan’s continued caution. The USD/CAD and AUD/USD pairs show similar caution, indicating that the dollar’s strength is becoming more discerning instead of broad-based. The present conditions bolster the relative strength of EUR/USD. The euro’s three-day stability above 1.1550 contrasts with the fluctuations seen in early November, suggesting a change in investor sentiment regarding European assets. This trend is supported by the steady stabilization of energy prices and a firmer dedication to fiscal responsibility among member states.
The existing volatility compression suggests a possible breakout approaching soon. The range between 1.1520 and 1.1620 has remained stable for more than ten sessions — a situation that frequently suggests a forthcoming major movement. Market participants expect heightened volatility in the coming week, coinciding with the release of delayed U.S. inflation and employment data. If the data confirms a slowdown in momentum along with the Fed’s accommodating approach, we could witness EUR/USD exceed 1.1620 and quickly near the 1.17–1.1750 range. Conversely, a surprisingly strong rebound in U.S. inflation or bold statements from the Fed might push the pair back to 1.1450, where the 200-day EMA acts as an essential support level. Analysts highlight that the Eurozone’s strength relative to the U.S. weakness backs medium-term euro gains; nonetheless, short-term price fluctuations continue to be swayed by news headlines. Technical traders are focusing on the 1.1550 pivot zone, seeing it as a neutral anchor until a breakout confirms the following directional change. Given the current macroeconomic indicators, TradingNews has assigned a HOLD position for EUR/USD in the short term, while a positive trend is expected as we move closer to December. The pair’s ability to maintain levels above 1.1520 in light of a dovish shift from the Fed and a restrictive approach from the ECB suggests considerable asymmetric upside potential. A breakout above 1.1620 would signal a strong bullish sentiment, opening up targets in the 1.17–1.18 range, while the downside seems limited around 1.1450 unless a substantial fiscal relief strengthens the dollar. The euro’s stability amid political uncertainty, supported by varying policies and macroeconomic consistency, enhances the view that the currency pair is poised for a medium-term recovery as the U.S. interest rate narrative leans towards a more accommodating approach.