The EUR/USD pair is currently positioned at approximately 1.1650, continuing its erratic consolidation phase following a significant eight-day rally that paused near 1.1679—marking its peak in seven weeks. The euro is experiencing upward momentum, driven by robust Eurozone growth data and a general weakness in the U.S. dollar. However, it is now facing a significant technical barrier as traders adjust their positions in anticipation of the upcoming U.S. Core PCE Price Index release and next week’s Federal Reserve meeting. The euro has received support from a stronger-than-anticipated Eurozone GDP growth of 0.3% in Q3, surpassing the 0.2% consensus and the prior quarter’s 0.1%. Annual growth holds steady at 1.4%, with employment increasing by 0.2% quarter-on-quarter, surpassing the anticipated 0.1%. The data suggests that, in spite of lackluster industrial output, the economy of the bloc demonstrates a degree of resilience—sufficient to alleviate concerns regarding a recession for the time being. In contrast, the U.S. dollar remains near a five-week low, with the Dollar Index fluctuating around 98.90, as markets price in an 85–87% probability of a 25-basis-point Fed rate cut at the upcoming December 10 policy meeting. The dovish repricing, influenced by a sequence of disappointing U.S. data and accommodating remarks from officials such as John Williams, has constrained the dollar’s capacity to benefit from robust labor reports, including Initial Jobless Claims declining to 191,000, marking their lowest level in three years.
Market participants are currently looking forward to the release of the U.S. PCE Price Index, which is the Federal Reserve’s favored measure of inflation. The headline PCE is anticipated to rise to 2.8% year-on-year, a slight increase from the previous 2.7%, whereas the core reading is forecasted to remain steady at 2.9%. A weaker print would strengthen the outlook for a December rate cut, likely driving EUR/USD above 1.1680 towards the October 17 high around 1.1730, while a surprising increase in inflation could limit the pair’s rise or initiate a pullback to 1.1600–1.1630. From a technical perspective, EUR/USD continues to operate within a clearly defined ascending channel that has been in place since the late-November low of 1.1560. The pair is positioned above the 50-day EMA and 200-day EMA, indicating a short-term bullish outlook. The RSI is currently at 61, indicating positive momentum while remaining outside of overbought conditions. Resistance is concentrated between 1.1679 and 1.1700, aligning with the 100% Fibonacci extension from the November advance. A breakout above 1.1700 would aim for the range of 1.1730–1.1750. Conversely, if that zone is not surpassed, profit-taking may occur, pulling back to 1.1630, with stronger support found at 1.1590–1.1575—these levels correspond with the 38.2% and 50% retracements of the most recent rally.
The U.S. dollar’s struggle to maintain its gains, even in the face of strong data, highlights a significant change in market sentiment. Market participants are prioritizing policy direction over minor enhancements in economic indicators. The speculation surrounding Kevin Hassett potentially succeeding Jerome Powell as Fed Chair has contributed to the prevailing uncertainty. Concerns are mounting that a shift in leadership may hasten a more aggressive easing cycle, thereby intensifying the pressure on yields and extending the period of dollar weakness. The U.S. 10-year yield holds firm around 4.12%, indicating a measured outlook as the inflation report approaches. If the PCE data confirms the ongoing disinflation trend, the dollar may drop below DXY 98.50, potentially allowing EUR/USD to test 1.1750 in the near term. In Europe, retail sales remained unchanged at 0.0% in October, falling short of the anticipated 0.1%, whereas manufacturing activity exceeded expectations. In light of varied consumer indicators, the ECB continues to adopt a cautious policy approach, with officials such as Villeroy de Galhau highlighting balanced risks associated with inflation. The ECB is anticipated to uphold a restrictive policy stance through the first quarter of 2026; however, it faces increasing pressure due to decelerating real wage growth and heightened unemployment risks in southern Europe. The short-term outlook for EUR/USD continues to be positive as it trades above the support range of 1.1630–1.1590. The trendline established from the low on November 26 remains effective as a dynamic support level. The 4-hour MACD shows momentum divergence, indicating possible exhaustion. This suggests that a temporary pullback may occur before any new breakout takes place.
Recent CFTC data indicates a rise in Euro net longs among institutional investors, climbing almost 12% week-on-week, which suggests a growing confidence in the pair’s medium-term strength. The upcoming FOMC meeting and U.S. CPI will be crucial in assessing if the euro can maintain its upward trajectory past the 1.17 level. The upcoming ECB minutes may offer valuable insights regarding the proximity of the central bank to modifying its current restrictive stance. Market participants are anticipated to keep a close eye on the 1.1590 level, which serves as the boundary distinguishing consolidation from reversal. Sustained closes above 1.1700 would indicate a continuation of the broader recovery phase that commenced from the October low near 1.0500. The interplay of technical indicators and macroeconomic factors remains supportive of euro appreciation relative to the dollar in the near term. Given the robust Eurozone GDP figures, the anticipated U.S. rate cut, and a weakening dollar, EUR/USD is set to revisit the 1.1730–1.1750 range, with a potential move towards 1.1800 should the bullish trend continue. On the downside, only a decisive daily close below 1.1575 would negate the current uptrend and reopen the path toward 1.1500. The framework is solid, the underlying principles bolster the argument for an optimistic outlook, and the indicators validate a steady position above critical benchmarks. Provided that EUR/USD remains above 1.1600, the trend suggests a Buy perspective, with a short-term target range of 1.1730–1.1800 and a possible medium-term extension toward 1.1900, contingent on the Fed affirming its dovish policy stance.