The EUR/USD pair is currently stabilized near the 1.1600 mark, indicating a market that is navigating through contrasting central bank perspectives and weakening economic indicators from the U.S. During Tuesday’s European session, the pair traded close to 1.1610, following a rise to a two-week high of 1.1650 as the dollar gained temporary support from U.S. Treasury yields while the euro held firm on resilient Eurozone inflation sentiment. The U.S. Dollar Index has rebounded to 99.10, stabilizing after last week’s drop but still 4% below its mid-November peak, keeping the euro supported. The euro’s rebound is aided by improving regional inflation trends, with Germany’s HICP at 2.6% versus 2.4% expected, and Eurozone CPI projected at 2.1% YoY with core near 2.5%. This supports the ECB’s stance that policy is “appropriately restrictive,” while U.S. data — including ISM Manufacturing PMI at 48.2 for a ninth month of contraction — heightens expectations for an 87% probability of a December 25-bps Fed cut.
The Federal Reserve has entered its blackout period, ahead of the December 17 policy meeting, with markets expecting at least one more cut this year and further easing into 2026. This dovish outlook contrasts sharply with the ECB’s commitment to maintain current rates, offering a medium-term advantage for EUR/USD as traders adjust positioning ahead of Fed Chair Powell’s remarks. The U.S.–Germany yield spread between the 10-year Treasury at 4.12% and the Bund at 2.28% has narrowed to 184 bps — a four-month low that supports euro stability. Any confirmation of a December cut could lift EUR/USD above 1.1700 if Eurozone CPI remains strong. Meanwhile, geopolitical developments such as Russia–Ukraine ceasefire discussions and stability in Middle Eastern energy markets have reduced safe-haven demand for the dollar, while European equities — with the DAX 40 up 1.7% and Euro Stoxx 50 up 0.9% — have attracted capital inflows that further support the euro.
EUR/USD is trading within a three-week symmetrical triangle formation, with resistance at 1.1656–1.1670 and support at 1.1542–1.1550. A daily close above 1.1669 signals a bullish breakout toward 1.1720 and then 1.1830, while failure to hold above 1.1600 risks a move toward 1.1550 or even the psychological 1.1500 level. The 20-day EMA near 1.1605 and the 100- and 200-day SMAs at 1.1520 form a major support cluster. RSI at 56 is neutral but supportive, while momentum oscillators show potential upside awaiting a catalyst. Intraday movements remain range-bound at 1.1590–1.1650 as traders await key data. Persistent 4-hour chart rejections below the 20-EMA signal accumulation, while sellers remain active near 1.1653 at the descending October trendline. A drop below 1.1590 reopens downside potential toward 1.1556 and 1.1500, which served as a double-tested base in November. Institutional positioning shows cautious euro bullishness, with EBS and CFTC data reflecting a 6% rise in net long contracts to 62,300 — the highest since September — as hedge funds reduce long-USD exposure amid diverging policy paths. ECB officials such as Joachim Nagel continue to back holding current rates and highlight steady inflation moderation. Meanwhile, the potential nomination of Kevin Hassett as Fed Chair — viewed as dovish under a Trump administration — poses longer-term downside risk for the dollar. Global yields jumped after BoJ Governor Ueda signaled a possible December rate hike, driving a temporary bond selloff that lifted global yields and helped stabilize the DXY, though the euro remained resilient. Markets interpreted the volatility as corrective rather than structural due to consistent Eurozone macro data.
Key upcoming EUR/USD drivers include Eurozone HICP on Dec 3 (expected 2.1%), where a stronger print may push the euro above 1.1700, while U.S. ADP Employment (Dec 4) at a forecast +121K and ISM Services PMI at 51.9 could influence USD direction — with weak readings likely boosting the euro. The Fed’s December 17 decision is expected to confirm a 25-bps cut, with markets already pricing in three cuts for 2026. The euro has rebounded from 1.0450 earlier this year to 1.1600 — a 1,150-pip rise — retracing over half its 2024 decline. The 1.1500 level remains a major inflection point, reinforcing November’s double bottom and the Q3 pivot low. A sustained break above 1.1700 could initiate a broader uptrend toward 1.1830 by Q1 2026, though risks remain from global energy volatility and potential ECB missteps if inflation persists. With Fed easing diverging from ECB stability, EUR/USD maintains a bullish outlook while above 1.1540, with upside targets of 1.1700, 1.1740, and 1.1830 and protective stops under 1.1460. Verdict — BUY EUR/USD, with medium-term potential toward 1.1830–1.1900 as long as inflation stays above 2% and the Fed delivers the anticipated December cut.