The EUR/USD pair continued its measured ascent this week, moving from 1.1630 to 1.1643, reaching intraday peaks at 1.1682 before pulling back slightly as Friday’s session concluded. This gradual increase indicates a buildup in anticipation of the Federal Open Market Committee meeting scheduled for December 11, 2025. Market participants expect a 25-basis-point reduction, resulting in the federal funds rate falling to 3.5%–3.75%, leading to renewed weakness in the U.S. dollar. The euro is experiencing positive momentum due to regional inflows and a rise in industrial sentiment within the Eurozone, which supports short-term demand in the range of 1.1620–1.1650. The evolving political and institutional framework within the Federal Reserve is reshaping market sentiment. Jerome Powell’s tenure, concluding in spring 2026, is already influencing expectations. The anticipated successor is expected to embrace a more lenient strategy should inflation stay under 2%, indicating a significant departure from Powell’s measured stance. The U.S. Dollar Index has declined below 99.80, marking its lowest point since September, which has contributed to the stabilization of EUR/USD around 1.1650.
The European Central Bank has kept its deposit rate steady at 3.75%, as inflation in the eurozone has decreased to 2.2% year-over-year, marking the lowest rate in four years. Decreased energy expenses and diminished import pressures have bolstered the euro’s underlying fundamentals. Simultaneously, eurozone industrial output increased by 0.6% month-over-month, and Germany’s PMI advanced to 49.8, indicating potential recovery. The correlation between the euro and the Stoxx 600 Index has risen to 0.73, indicating an increased investor interest in European assets as capital shifts away from the U.S. The EUR/USD trend continues to exhibit a structurally bullish outlook as long as the price remains above 1.1590, the level that facilitated the last significant breakout. The pair is presently fluctuating within a consolidation range of 1.1600 to 1.1700. A strong close above 1.1700 could propel the rally toward 1.1740, whereas a retreat below 1.1590 might trigger profit-taking around 1.1535. The 50-day EMA at 1.1560 remains a key support level for short-term bullish momentum, with algorithmic models pinpointing 1.1668 as the essential pivot for further movement toward 1.1725.
Recent U.S. economic indicators indicate a deceleration in growth. Nonfarm Payrolls increased by just 142,000, while the unemployment rate rose to 4.1%, marking its highest level since 2021. Meanwhile, U.S. 2-year Treasury yields decreased to 4.28%, while German Bunds held steady at approximately 2.23%, resulting in the yield spread narrowing to its tightest level in 10 months — a significant bullish factor for EUR/USD. Simultaneously, the eurozone’s current account surpluses have increased to €31.5 billion, offering further currency support via inflows backed by exports. CFTC data indicate that net-long euro contracts have risen for the third straight week, now reaching +1.07 million, up from +111,800 the previous week — a definitive indication of institutional accumulation. Option markets indicate significant call positioning above 1.17 for December expiry, suggesting expectations of a measured upward movement. If the Fed adopts a dovish stance next week, traders expect a swift approach to 1.1740 and possibly 1.1800.
Liquidity clusters are focused within the range of 1.1620–1.1650, indicating areas of institutional demand. A move above 1.1700 may trigger stop orders targeting 1.1740, whereas a failure to hold above 1.1610 could lead to a decline toward 1.1550, which represents the 38.2% Fibonacci retracement of the November rally. The EUR/USD volatility index indicates a low level, reflecting a phase of steady accumulation instead of speculative excitement. Europe’s natural gas reserves, currently at 86% capacity, mitigate energy-related downside risks for the euro, while a depreciating dollar continues to enhance trade balances. Nonetheless, the possibility of U.S. fiscal instability and the resurgence of trade tensions with China may introduce short-term fluctuations in global currency markets. If the DXY were to rebound toward 100.40, the euro could encounter temporary resistance before regaining strength above 1.17. All macro and technical indicators suggest a continued strengthening of the euro through early 2026. The ongoing structural weakening of the USD, alongside the strengthening fundamentals in the eurozone, indicates a likely continuation of the upward trend. The key price levels to monitor are 1.1590, which serves as base support, and 1.1740, acting as the resistance trigger. A confirmed break above 1.1740 would pave the way toward 1.1800–1.1850, indicating a possible 2% upside extension.