EUR/USD is currently positioned between 1.1720 and 1.1730 as of December 17, experiencing a pullback from the 1.1780 peak observed at the end of the previous week, yet maintaining a distinctly positive framework. The pair has decreased approximately 0.2–0.3% today after reaching a 12-week peak exceeding 1.1780. However, it continues to trade above the critical 1.1700 level and is significantly above the medium-term support range of 1.1639 to 1.1611. The 20-day average, along with the middle Bollinger band positioned at 1.1639 and the 100-day EMA at approximately 1.1611, serves as a critical threshold for euro bulls. Provided that EUR/USD remains above that zone, the recent pullback appears to be a consolidation phase following a significant upward movement, rather than an indication of a trend reversal. In the short term, the pair remains positioned near the 50-EMA at approximately 1.1705–1.1720, with the price favoring the upper end of the recent range instead of the lower end.
The U.S. Dollar Index is currently positioned around 98.40–98.54, showing signs of stabilization following a significant decline that has resulted in the dollar being down nearly 9.5% year-to-date, setting the stage for its most pronounced annual drop since 2017. The fundamental tape presents a mixed outlook: Non-Farm Payrolls increased by 64K, surpassing the anticipated figure of approximately 50K. However, the unemployment rate rose to 4.6%, and average hourly earnings saw a modest rise of just 0.1% month-over-month, indicating a potential easing in wage pressures. Retail sales showed no growth, and PMIs declined, with manufacturing at approximately 51.8 and services close to 52.9, both reflecting weaker performance compared to previous figures. The outcome reflects a “slowing but not collapsing” growth profile – sufficient to prevent the dollar from further decline, yet inadequate to reinstate a structural bullish trend. For EUR/USD, this indicates that dips are being supported by a weaker medium-term dollar environment, even though short-term demand for the greenback sometimes drives the pair away from its peaks.
Regarding the euro, the outlook for Thursday’s ECB decision is quite straightforward: the market anticipates a hold with the deposit rate remaining at 2%, unchanged since July. The current Eurozone data does not provide sufficient strength to warrant a resumption of tightening measures, nor does it exhibit weakness that would necessitate an immediate shift towards easing policies. The final Eurozone CPI is approximately 2.1% year-over-year, with core CPI close to 2.4%, remaining just above the target. Meanwhile, growth indicators appear sluggish, as evidenced by the German Ifo Business Climate declining to around 87.6, compared to the expected 88.2. The ECB remains entirely reliant on data for its decision-making process. For EUR/USD, this “low drama” stance restricts significant downside potential: there is no strong dovish shock being factored in, so euro sellers possess minimal macro leverage beyond profit-taking following the ascent toward 1.18. The pair’s subtle movement – a decline from 1.1780 to the range of 1.1720–1.1730 – aligns with a market that is adjusting positions ahead of the meeting, rather than discarding the optimistic outlook. On the U.S. side, the latest labor and activity data are gradually undermining the case for a consistently robust USD. The 64K NFP gain appears satisfactory at first glance; however, the interplay of a 4.6% unemployment rate, subdued wage growth at 0.1% month-over-month, and stagnant retail sales indicates a cooling economy rather than one that is overheating. Recent Flash PMIs retreating from previous highs support the notion that demand is experiencing a decline in momentum.
Simultaneously, the Fed has implemented rate cuts and is indicating a pause instead of pursuing an aggressive easing cycle, which prevents front-end yields from plummeting. The combination of slower growth and moderating inflation, coupled with a lack of panic easing, limits the potential upside in DXY while also averting a significant downturn. In the case of EUR/USD, the interpretation is clear: declines towards 1.1700–1.1685 attract buyers, provided the market perceives the Fed as nearing the conclusion of its cycle compared to the ECB, and as long as no U.S. data releases trigger a robust dollar trend. From a technical perspective, EUR/USD continues to exhibit characteristics of a bullish market experiencing a constructive pause. Currently, on the daily chart, the price stands at approximately 1.1730, positioned above the 100-day EMA at 1.1611 and exceeding the 20-day average, which is near 1.1639. The Bollinger bands are expanding, with the price approaching the upper band, which was recently examined in the range of 1.1788–1.1795. The RSI, currently around 65 on the daily chart, indicates a bullish stance, as it has not yet reached overbought levels, suggesting robust momentum that is still active. On the intraday side, short-term supports are positioned at 1.1720, 1.1685, and subsequently at 1.1639, with the ascending trendline from late November intersecting that intermediate zone. Resistance is positioned initially within the 1.1760–1.1788 range, followed by 1.1810, where previous highs are concentrated. A daily close above 1.1788–1.1810 would create opportunities for higher extension levels as we approach year-end, whereas a break below 1.1639–1.1611 would shift the strategy from “buy dips” to “wait and reassess.”