The EUR/USD pair has experienced an upward trend for the sixth consecutive session, maintaining a position close to 1.1630, marking its peak since mid-November. The rally is driven by increasing expectations that the Federal Reserve will implement a 25-basis-point rate cut in December. The U.S. Dollar Index has declined below 99.50, while Treasury yields have also decreased, with the 10-year yield now at 4.02%. The recent dovish shift has led to a depreciation of the greenback, allowing the euro to continue its recovery despite the presence of lackluster U.S. economic data. The forthcoming ISM Manufacturing PMI, anticipated at 48.6 compared to 48.7 in October, continues to be a significant catalyst, and should it fall short of projections, the selling of dollars may intensify, driving EUR/USD towards 1.1655–1.1670. Eurozone consumer prices remained stable, establishing a robust basis for the euro. The Harmonized Index of Consumer Prices recorded a year-over-year increase of 2.2%, while core inflation has risen to 2.5%, with France’s CPI at 0.8%, Spain’s inflation at 3.1%, and Germany’s regional figures at 2.3%.
Even with the Manufacturing PMI contracting to 49.6, retail sales experienced a month-on-month increase of 0.3%, indicating a slight recovery in consumption. The European Central Bank continues to exercise caution while maintaining a steadfast approach to keeping rates unchanged, with policymakers indicating no immediate need for tightening and demonstrating confidence in the trend of moderating inflation despite mixed data. EUR/USD has technically surpassed the 1.1615 resistance level and maintains its position above both the 50-EMA and 200-EMA. The Relative Strength Index at approximately 56 suggests a moderate bullish trend, and the MACD positioned above the signal line indicates potential for additional upward movement. Key resistance levels are identified at 1.1655, 1.1670, and 1.1730, whereas support is positioned at 1.1550 and 1.1500, and the persistent price movement above 1.1600 indicates short-term bullish sentiment with potential targets in the 1.1720–1.1800 range.
The U.S. Dollar is experiencing a decline as investors adjust their strategies in anticipation of the Fed’s decision. Chair Jerome Powell’s silence during the pre-meeting blackout period has resulted in markets depending on previous dovish indications from members like John Williams and Austan Goolsbee, both of whom suggested the possibility of easing as soon as December. The likelihood of a December rate cut has increased to 87%, as markets anticipate at least two further reductions in 2026. The decline in yields and the prevailing dovish sentiment have significantly impacted the DXY, resulting in robust support for the euro against G10 currencies. The Dollar Index is currently evaluating a significant ascending trendline around 99.35, coinciding with previous swing lows and the 50-EMA convergence. The RSI at approximately 40 indicates a cooling trend, yet not exhausted momentum, and a decisive move below 99.00 would reveal 98.56, while any recovery toward 99.82–100.38 is expected to encounter selling pressure.
The euro appreciated by 0.29% against the USD, 0.24% against the GBP, and 0.31% against the NZD, indicating notable strength. In light of risk aversion in equities and a decline in Bitcoin below $90,000, there has been a notable shift in flows towards safer assets such as the euro and yen. This week’s attention is directed towards Eurozone Services PMI, Retail Sales, and revised inflation data, succeeded by U.S. ADP employment and PCE inflation reports. The options expiry at 1.1600, characterized by significant open interest, could serve to stabilize prices throughout the trading day. The ECB’s decision to maintain its policy stands in stark contrast to the Fed’s approach of easing, providing the euro with a near-term advantage, nonetheless robust U.S. labor or inflation surprises may reignite demand for the dollar.