The Euro (EUR) remains stable, trading near the midpoint of its intraday range. The currency finds support from unexpectedly stronger German and French industrial data, with technicians suggesting potential for an upward shift towards 1.18.
German Factory Orders contributed to a temporary rise in EUR earlier, but the gains paused in the upper 1.16s. Eurozone GDP figures were slightly revised upwards to 0.3% quarter-over-quarter in Q3, maintaining a positive technical outlook for the Euro.
Market Observations
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The Euro is showing some underlying strength, thanks to better-than-expected industrial numbers out of Germany and France. While we’ve seen it stall in the upper 1.16s, the technical indicators suggest there’s momentum for a push higher. The key is whether we can break through that recent resistance level.
The bigger story for us is the weakening US dollar, driven by widespread expectations of another Federal Reserve rate cut. With the latest November 2025 US inflation report showing a cool-down to 3.1%, markets are now pricing in an over 85% chance of a 25-basis-point cut at the upcoming December 16-17 FOMC meeting. This contrasts sharply with the situation back in early 2024 when rate hikes were still the primary concern.
Central Bank Policy Divergence
Meanwhile, the European Central Bank appears to be on hold, facing stickier inflation which registered 2.8% in the latest Eurozone HICP data. This policy divergence, where the Fed is easing while the ECB holds firm, creates a strong tailwind for the EUR/USD pair. This could be the catalyst needed to push the exchange rate toward the 1.18 handle.
For traders, this outlook suggests positioning for a rise in the EUR/USD over the next few weeks. Buying call options with strike prices around 1.1750 or 1.1800 expiring in late December or January could be a viable strategy to capitalize on the expected move. Implied volatility is ticking up ahead of the Fed decision, so acting sooner may be advantageous.
We’ve seen similar patterns in the past, such as during the Fed’s easing cycle in 2019 when sustained rate cuts eventually weighed on the dollar. Given that the market anticipates the current Fed funds rate of 3.75-4.00% to be cut further, this historical precedent supports a continued bullish view on the Euro. This strategy positions us to benefit from a trend that appears to be just getting started.
