EUR/USD is currently positioned between 1.1765 and 1.1770, showing signs of stabilization following a four-day decline as the Dollar takes a breather and liquidity diminishes as we approach year-end. The primary factor influencing this situation is the adjustment of policies. The Fed has implemented a complete 75 bps easing cycle in 2025, reducing rates by 25 bps in December, which adjusts the target range to 3.50%–3.75%. The action solidified the perception that the Fed is currently in a phase of easing, albeit not in an aggressive manner. Futures currently indicate a significant probability that no developments will occur in January. The likelihood of maintaining the current rate at the upcoming meeting has increased to approximately 83.9%, whereas the chances of an additional 25 basis points cut have decreased to around 16.1%. A week ago, the likelihood of a cut was approximately 20%. The change eliminates the most accommodative aspect, restricts new declines in the Dollar, yet does not establish a bullish trend for the USD. Regarding the Euro, the ECB maintained its rates in December and emphasized that any future adjustments will be contingent upon data analysis. The current position is more hawkish compared to a Federal Reserve that has implemented three rate cuts this year. The outcome is a tightening policy gap that fundamentally underpins EUR/USD during pullbacks, despite short-term movements still favoring the Dollar whenever yields rise or risk appetite diminishes. The pair finds itself caught between a “softening” Fed and a cautious ECB, with the range of 1.17–1.18 serving as the focal point as traders anticipate the FOMC minutes to determine the next movement.
The overall Dollar landscape clarifies why EUR/USD remains stagnant rather than exhibiting a clear trend. The DXY is currently positioned around 98.0, having turned away from the 98.70–98.75 range and experiencing a pullback, yet it continues to maintain significant retracement levels. The initial significant support level is the 0.236 Fibonacci zone near 97.98, with the 0.382 area around 98.13 positioned above it, currently serving as the primary resistance on any potential rebound. If DXY surpasses approximately 98.25, potential for upward movement extends toward 98.60. A break of that nature would likely limit EUR/USD and pull it back toward 1.1700 or lower. If the index falls below 97.75, Dollar bulls relinquish their grip, allowing EUR/USD to target and potentially surpass the 1.1805–1.1810 range. Until the minutes are released, EUR/USD remains confined within a correlation range: provided DXY fluctuates between 97.75 and 98.60, EUR/USD is expected to hover around 1.1700 to 1.1850, with only minor disturbances beyond those boundaries rather than a clear trend. Currently, EUR/USD is maintaining a consolidation phase within a bullish framework, showing no signs of a breakdown. On the 2- to 4-hour charts, the price continues to operate within an ascending channel that commenced in early December. The pair currently rests slightly above the ascending trendline, coinciding with the short-term moving averages. The initial significant support level is the 50-period EMA, situated in the range of 1.1750–1.1755. Every decline toward that EMA has drawn in buyers, which is precisely how a robust bull channel operates. Significant support is identified at the 200-period EMA, located within the range of 1.1700 to 1.1725. This area has served as the final “line of defense” for bullish positions this month. Below the averages, a flat horizontal shelf at 1.1700 indicates the point at which the bullish narrative begins to falter. Provided that daily closes remain above 1.1700, the price action indicates a trend pause instead of a reversal. A decisive daily close beneath that level would shift the structure into a more bearish regime and prompt discussions of a potential move back into the mid-1.16s.
The market has consistently encountered resistance in the 1.1785–1.1810 range on the upside. The upper boundary in the range of 1.1805–1.1810 serves as the genuine catalyst for a breakout. A decisive breakthrough in that area sets 1.1850 as the initial target, with 1.1875 following closely behind. If momentum and macro conditions remain favorable, a subsequent move towards the low 1.19s appears plausible. Momentum indicators support the consolidation narrative. On intraday timeframes, the RSI is positioned around 50–52, indicating a neutral and balanced state, without suggesting any signs of exhaustion. On the daily chart, momentum has moderated from previous peaks without establishing a significant bearish divergence, which maintains the possibility for another upward movement if the fundamental catalyst aligns. The macroeconomic landscape and geopolitical dynamics continue to favor the US Dollar during periods of heightened fear. The persistent tension surrounding Russia and Ukraine remains a limiting factor for Euro appreciation, as any escalation typically drives capital back towards US assets and into USD cash. The safe-haven premium supports DXY, maintaining its bid despite US yields declining in reaction to the Fed’s 3.50%–3.75% policy range. However, the Euro demonstrates greater resilience compared to its performance during past crises. The intensity of the energy shock has diminished, and the risk of core fragmentation within the Eurozone is not as severe as it has been in previous cycles. The absence of rate cuts from the ECB, in contrast to the Fed, provides the single currency with a structural support mechanism during downturns.
The net effect for EUR/USD around 1.1765–1.1770 reflects a balance of forces. The prevailing global risk shocks and the tendency for flight-to-quality flows continue to support the Dollar. The divergence in policies and a more measured approach from the ECB support the Euro in medium-term outlooks. As long as neither side establishes a definitive advantage, the pair will continue to oscillate within the established range, responding more to daily fluctuations in yields and news developments rather than any singular macroeconomic narrative. The tactical map is characterized by a precise and focused range of levels. On the downside, immediate support is located at 1.1750–1.1755, coinciding with the 50-EMA and recent intraday lows. A break and close below that band would reveal the deeper support area at 1.1705–1.1725, where the 200-EMA and recent inflection points converge. Below that, the 1.1700 level serves as the pivot point that distinguishes a robust bullish correction from the onset of a more significant decline. On the upper side, resistance has been substantial between 1.1785–1.1810. The upper strip at 1.1805–1.1810 has consistently rejected multiple attempts, establishing it as the critical breakout threshold. Above that, upside targets align at 1.1850 initially and 1.1875 subsequently, corresponding with previous reaction highs and calculated extensions from the channel. A shift into that area would likely necessitate a dovish interpretation of the FOMC minutes or a less severe reaction from the Dollar to the text.
With volatility having contracted and the RSI indicating neutrality, EUR/USD is positioned for a potential range expansion as the minutes eliminate ambiguity. Until then, the most logical perspective is that 1.1700–1.1810 represents the active range, characterized by sharp yet contained fluctuations within it rather than a sustained breakout. Analyzing the available data, the overall evidence indicates a bullish sentiment on EUR/USD, rather than a neutral stance. The Federal Reserve has implemented 75 basis points of reductions, currently positioned at a range of 3.50% to 3.75%. The ECB has not taken action. The Dollar index remains constrained beneath 98.60. The pair is maintaining an ascending channel, adhering to support at 1.1750 and 1.1700, while momentum has recalibrated from overbought conditions without disrupting the trend. The current mix suggests a strategy of purchasing during dips instead of selling during peaks, as long as the 1.1700–1.1725 range remains intact on a closing basis. Pullbacks to 1.1750 or even down to 1.1705 should be viewed as favorable entry points for long positions, aiming for a medium-term target in the range of 1.1850–1.1875. There is potential for movement beyond 1.19 if the Fed minutes suggest a dovish stance for 2026 or if US economic data continues to weaken more rapidly than that of the Eurozone. A prudent strategy involves waiting for a definitive move above approximately 1.1810, subsequently targeting the range of 1.1850–1.1875, while managing risk beneath 1.1750. One could adopt a more assertive approach by establishing positions within the range of 1.1750–1.1725, implementing a strict stop-loss below 1.1700, while aiming for a target structure that favors upward movement. A decisive daily close below 1.1700, particularly if DXY surpasses 98.60, would negate the buy-the-dip perspective and shift EUR/USD into a sell-on-rallies scenario, introducing downside risk toward the mid-1.16s.