EUR/USD navigated through a significant resistance zone throughout the week, concluding just beneath the upper boundary. The pair commenced trading at approximately 1.1640 and concluded at around 1.1743, with intra-week peaks nearing 1.1762. The result indicates an approximate 0.88% increase for the week, alongside a definitive examination of the 1.1686–1.1748 Fibonacci range that has impeded the pair for nearly five months. Recent short-term data indicates that EUR/USD is positioned at 1.17456, reflecting a modest decline of approximately 0.25% over the past three months. This suggests that the pullbacks have been relatively shallow in comparison to the recent recovery. Concurrently, a brief-term indicator continues to signal “buy,” aligning with the prevailing trend of higher highs and higher lows observed on the daily chart.
Regarding the USD leg, the situation is clear: the Federal Reserve implemented an additional 25-basis-point cut, yet the dollar depreciated rather than rebounding. The broad dollar index has decreased by approximately 9% year to date, indicating that the “US exceptionalism” premium has been diminishing over several months rather than just a few days. The primary change is not merely the recent cut, but rather the market’s strong belief that the Fed has entered a definitive easing phase, in contrast to other major central banks that are not hurrying to adopt similar measures. Considering the recent weaker US releases, such as softer labor indicators and inconsistent activity data, the USD has been experiencing a decline in yield advantage, coinciding with EUR/USD approaching resistance levels. The macro backdrop facilitated the pair’s movement beyond the low-1.16 range, enabling it to target the 1.17s, despite US yields not experiencing a complete decline.
The EUR leg is not merely benefiting from dollar weakness; it is bolstered by central bank communication and relative growth dynamics. The euro area’s policy is firmly established with the deposit rate at approximately 2%. The central bank has indicated that it perceives its position as “in a good place,” rather than gearing up for an imminent easing cycle. The bloc’s growth has been characterized as nearing potential instead of being recessionary, and there are ongoing conversations about the possibility of adjusting future projections upward. Surveys conducted among economists indicate that there will likely be no alterations to the policy rate in the forthcoming meeting, and notably, there is an absence of any aggressive cutting cycle projected through 2026. This indicates that EUR/USD is operating in a context where the Fed is implementing easing measures while the ECB maintains its current stance, thereby systematically reducing the rate spread to the advantage of the euro. Additionally, the EUR has increased approximately 13% this year on a trade-weighted basis, indicating that its strength is widespread, not limited to the USD alone. On the listed product side, the Invesco CurrencyShares Euro Trust experienced an outflow of approximately 5,363,500 USD on December 9, which corresponds to around 1.22% of its 439,425,000 USD in assets under management. The reduction is significant, yet not extreme. It appears to be a strategic adjustment rather than a complete divestment from euro exposure. Simultaneously, the price movement in EUR/USD does not indicate a panic sell-off: the pair is currently at 1.17456, reflecting a slight 0.25% decline over three months, while the one-day technical outlook remains on “buy.”
The analysis indicates that certain investors are realizing gains in the ETF following the euro’s robust performance this year, whereas spot traders continue to perceive upside potential as long as the pair remains above critical support levels. An ETF outflow of just over 1% of AUM serves as a mild cautionary signal, rather than a definitive rejection of the EUR. Crosses indicate that the strength of the euro is not limited to EUR/USD. The EUR/JPY pair has reached new all-time highs, surpassing 182.00 and progressing through key psychological levels: 182.00 transitioned from resistance to support, 182.50 emerged as the next barrier, and prices have continued to advance towards 183.00. This type of pattern typically occurs when buyers maintain strong control throughout multiple sessions. The Bank of Japan’s continued ultra-loose policy, coupled with market scrutiny of the upcoming rate decision, highlights the euro’s resilience near historic levels, indicating a demand for EUR that extends well beyond the narrative surrounding the dollar. In EUR/GBP, a pullback occurred following a three-year high; however, recent sessions have shown recovery as buyers re-entered the market and defended the 0.8738–0.8753 zone. Currently, GBP/USD is positioned in the mid-1.33s after reaching approximately 1.34225 following the Fed cut, subsequently experiencing a decline. The observed pattern – euro exhibiting strength against the pound, while the pound shows only slight gains against the dollar – conveys a clear insight: the euro stands as the comparatively stronger component in various significant currency pairs, not limited to EUR/USD alone.