The EUR/USD is trading near 1.1765, showing slight losses amid a quiet market environment before the New Year. The Euro is battling the effects of geopolitical tensions which are limiting its rise, though it remains supported by recent highs around 1.1800.
The US Dollar is seeing its weakest performance in almost ten years, with divergent monetary policies contributing to this trend. A nearly 14% appreciation for the EUR/USD pair is expected in 2025 due to differences between the ECB and the US Fed, which plans rate cuts next year.
Markets Await Feds December Minutes Release
Markets are awaiting the Fed’s December policy meeting minutes release. The Fed had cut rates recently and signals further cuts in 2026, with a new dovish chairman upcoming. Despite geopolitical issues involving Ukraine and Taiwan, USD impact remains low, while Euro strength is capped.
Technical analysis indicates EUR/USD support around 1.1760 amid a broader bullish trend. The pair’s upward momentum is limited as technical indicators remain bearish. Key resistance levels to watch include the 1.1805 and 1.1820 areas, with further targets around 1.1863.
The US Federal Reserve manages monetary policy by adjusting interest rates to achieve stable prices and full employment. QE and QT are tools used to manage currency strength by altering credit flow in the financial system.
With the market in a holiday lull, we are watching the EUR/USD pair trade sideways near 1.1765. The major theme remains the divergence between a dovish Federal Reserve and a more hesitant European Central Bank. Tonight’s release of the Fed’s December meeting minutes is the main event we are waiting for to provide direction.
Outlook For A Higher EUR/USD
The case for a higher EUR/USD in the coming weeks is built on the Fed’s clear intention to cut rates. We have seen US Core PCE inflation, the Fed’s preferred gauge, cool to 2.4% in the data released for November 2025, and the latest jobs report showed unemployment ticking up to 4.1%. This data supports the market’s bet on multiple rate cuts in 2026, a sharp reversal from the aggressive hiking cycle we saw back in 2022 and 2023.
However, traders should remain cautious due to rising global tensions, which could limit the Euro’s gains. The uncertainty surrounding peace talks between Russia and Ukraine, combined with Chinese military exercises near Taiwan, could trigger a flight to safety. In such scenarios, the US Dollar often strengthens regardless of the Fed’s interest rate policy.
Given these opposing forces, options strategies that benefit from a spike in volatility could be considered. With the pair pinned between support around 1.1750 and resistance at 1.1805, a straddle or strangle could pay off if the Fed minutes or a geopolitical headline causes a sharp breakout in either direction. The thin holiday trading could amplify any sudden market moves.
Looking ahead, we’ll be watching tonight’s Fed minutes for any signs of division within the committee about the pace of easing in 2026. After we move past the New Year, attention will immediately shift to the first US employment report of 2026, due out next week. That report will be critical in confirming whether the US economy is cooling enough to justify the Fed’s projected rate cuts.
