The EUR/USD sees a decrease to around 1.1730 during the early European Wednesday session, faced with renewed US Dollar demand. This decline occurs as the ECB is expected to leave interest rates unchanged for a fourth consecutive meeting, continuing a steady 2% key deposit rate since July.
The US labour market data shows resilience with signs of slowing. November’s Nonfarm Payrolls increased by 64,000, exceeding estimates of 50,000, while the unemployment rate nudges up to 4.6% from 4.4% in October, possibly putting downward pressure on the dollar.
Technical Analysis
In technical analysis, EUR/USD trades at 1.1732, with the 100-day EMA at 1.1611 suggesting an upward bias. The RSI at 65.58 reflects robust momentum, with resistance at 1.1788 and support at 1.1639 and 1.1611 respectively, indicating a potential bullish outlook unless capped by resistance.
The European Central Bank, based in Germany, oversees Eurozone monetary policy, primarily focusing on maintaining price stability around 2% inflation. The ECB’s strategies, including interest rate adjustments and quantitative easing, greatly impact the Euro’s strength.
Quantitative easing, enacted during financial crises, tends to weaken the Euro, while quantitative tightening, which ceases bond buying, typically supports the currency.
Economic Data and Policy Divergence
As we look at the situation, the EUR/USD was hovering around 1.1730 ahead of the European Central Bank’s December rate decision. The ECB met expectations last Thursday by holding its key deposit rate at 2.0%, providing some clarity to the market. This stability has allowed the pair to push through previous technical barriers.
Recent economic data now provides a clearer picture than the mixed US jobs report from November 2025. The latest Eurozone inflation figures show core HICP holding firm at 2.6%, reinforcing the idea that the ECB is done cutting rates for now. Conversely, US Core PCE, the Fed’s preferred inflation gauge, recently eased to 2.8%, increasing speculation that the next move from the US will be a rate cut in the first half of 2026.
This policy divergence has propelled the pair above the 1.1788 resistance level, which we now see as a potential new support zone. In the coming weeks, derivative traders should watch for a potential test of the 1.2000 psychological level. Buying call options with strikes above 1.1900 could be a viable strategy to position for further upside.
With the ECB meeting now in the past, implied volatility has likely decreased, making options strategies relatively less expensive. Traders could consider using pullbacks toward the 1.1788-1.1800 area to initiate long positions via futures contracts. Using protective put options below 1.1750 can help manage the risk of a sharp reversal.
