The EUR/USD pair is currently positioned between 1.1710 and 1.1720 following four consecutive days of declines. Nevertheless, it retains the majority of its approximately 2% rally over the past three weeks and continues to operate within a distinct upward trend. The price has retraced from this week’s three-month peak at 1.1804 and is currently examining consolidated support around 1.1700, maintaining the prevailing trend. The market is viewing this as a consolidation phase following an extension, rather than a reversal. On the daily chart, EUR/USD is firmly positioned above all significant moving averages. The price is currently positioned above the nine-day EMA at approximately 1.1713, surpassing the 15-day moving average located around 1.1687, the 20-day at 1.1659, and the 50-day EMA near 1.1644. All of them exhibit an upward slope, affirming a pattern of higher lows and ongoing demand during pullbacks. The 14-day RSI is positioned in the low 60s (approximately 61–62), indicating strong bullish momentum while avoiding overbought territory. This scenario presents a typical trending market that is consolidating just beneath resistance, rather than indicating a peak.
On the four-hour chart, EUR/USD is currently consolidating within a rising channel, trading in the range of 1.1714–1.1717 and hovering around the 4H 50-EMA. Meanwhile, the 100-EMA, positioned between approximately 1.1647 and 1.1680, continues to exhibit an upward slope. The latest candles exhibit overlapping bodies and upper wicks, indicating a decline in upward momentum rather than a strong selling pressure. The four-hour RSI has decreased to approximately 45, while the MACD remains below zero with red bars, indicating a corrective phase within an uptrend rather than signaling a breakdown. The resistance levels above the current spot are clearly established. Initial resistance is observed at 1.1750–1.1760, where 1.1750 serves as a short-term breakout trigger and 1.1760 indicates a recent swing high. Bulls are aiming for the two-month high at 1.1804 and the 1.1820 range, aligning with the peaks observed earlier in September. Should EUR/USD achieve a daily close exceeding 1.1820, attention will shift to the upper boundary of the daily ascending channel near 1.1850, subsequently targeting the psychological and technical levels at 1.1900, and then 1.1918, marking the peak since June 2021. Momentum accounts will execute trades based on that precise sequence. The initial support level is where the pair is presently situated. The nine-day EMA at 1.1713, the December 17 low at 1.1703, and the round 1.1700 handle are positioned above short-term trendline support. A clean break below 1.1700 shifts attention to the 1.1687/1.1685 area, where the 15-day average and previous swing levels from December 11 and December 4 align. Below that, the 1.1659–1.1650 band (20-day average and former resistance) and the 1.1645–1.1644 pocket (50-day EMA and 4H structure) represent the critical threshold. A daily close below 1.1640 sets the stage for a move towards 1.1615, with additional weakness potentially targeting the broader 1.1550 zone as a deeper correction objective.
The recent US CPI release is the primary factor contributing to the weakness observed in the dollar component of EUR/USD. Headline inflation decelerated to 2.7% year-on-year, contrasting with a consensus of 3.1% and a prior figure of 3.0%. Meanwhile, core CPI eased to 2.6%, down from 3.0%. This reinforced a narrative of disinflation and led traders to move away from aggressive expectations of a prolonged high-rate environment. The immediate effect was a depreciated dollar and reduced real yields, which inherently bolster EUR/USD as the pressure from rate differentials diminishes. The US Dollar Index is currently positioned around 98.6, confined within a descending channel as observed on the four-hour chart. The price remains constrained beneath the 50-EMA at approximately 98.96 and the 100-EMA around 99.28, with the channel midline continuing to serve as a barrier. Immediate supports are positioned at 98.17, followed by 97.87 close to the lower boundary. The RSI has made a recovery to approximately 55; however, this level is insufficient to alter the structure to a bullish stance. As long as DXY remains below 99.00 and under its key EMAs, the broader trend continues to favor a weaker dollar, which indirectly supports EUR/USD.
The broader US macro data introduces complexity while maintaining the prevailing dollar-negative sentiment. Initial jobless claims came in at 224K, aligning with forecasts and showing an improvement from the previous 237K, indicating stability in the labor market. The Philadelphia Fed Manufacturing Index has significantly dropped to -10.2, contrasting sharply with the anticipated 2.5, indicating notable weakness in regional manufacturing. Current market focus is on existing home sales, anticipated at 4.15 million compared to the previous 4.10 million, alongside the final Michigan Consumer Sentiment expected at 53.4, slightly up from 53.3, serving as indicators for demand and consumer confidence. Unless those numbers surprise significantly to the upside, they are more likely to reinforce the softer-dollar narrative than reverse it. In the context of EUR/USD, the ECB is emphasizing stability and optionality. The deposit facility rate remains steady at 2.0%, with the latest decision being unanimous. President Lagarde clearly declined to commit to any specific rate trajectory and reiterated that all possibilities are still on the table. Revisions to growth forecasts indicate an increase to 1.4% for 2025 and 1.2% for 2026. The combination of a slightly improved growth outlook, a 2.0% minimum for rates, and a lack of aggressive easing signals contributes to the euro’s stability as a funding currency, particularly in light of market expectations for at least two Fed rate cuts in 2026. The domestic Eurozone data continues to limit the potential upward movement of the euro. Germany’s GfK Consumer Confidence index fell to -26.9 from -23.4, falling short of expectations of -23.2 and highlighting the persistent weakness in household sentiment.
German producer prices remained unchanged month-over-month following a 0.1% increase, yet they experienced a decline of 2.3% year-on-year, which is weaker than the previous -1.8% and the consensus estimate of -2.2%. Later in the day, Eurozone consumer confidence is anticipated to be -14.0, a slight improvement from -14.2, yet it remains significantly negative. The persistent weakness in German demand and producer prices offsets the revised growth forecasts, limiting the euro’s ability to propel the EUR/USD pair significantly higher on its own. Currency-performance tables illustrate a complex scenario rather than a straightforward euro selloff. In a recent analysis, the euro exhibited a minor decline against the USD, approximately -0.08%, while remaining relatively stable against GBP, CAD, AUD, NZD, and CHF, with fluctuations primarily ranging from -0.05% to +0.22%. In a different analysis, the EUR emerged as the strongest currency against the JPY, appreciating approximately 0.38%, despite showing a slight decline against the dollar. This indicates that investors are reducing their positions in EUR/USD around 1.18 following a rally, rather than completely exiting euro exposure overall. The alignment of positioning and sentiment with the price action is evident. Institutional accounts are demonstrating a consistent inclination towards euro exposure, evidenced by ongoing demand for upside EUR/USD structures in the options markets. Retail flow presents a mixed picture, yet there is a gradual shift towards the long side as prices maintain a stable position above 1.16–1.17. Four consecutive red daily candles following a touch at 1.1804 are interpreted as a pause for profit-taking rather than a reversal signal, provided the pair maintains the 1.1680–1.1650 support band on a closing basis.