Insights 
VT 
EUR/USD commenced the week positively due to widespread USD selling. Anticipations of another Fed rate cut in December have negatively impacted the USD, benefiting the euro. The pair is trading above the 1.1600 level, testing the 200-day SMA. A sustained break above this level could signal further upward movement.
Factors undermining the USD include the Federal Reserve’s dovish stance. The USD Index hit a two-week low, with expectations of a rate cut in December. The ECB’s hawkish stance also supports the euro. The ECB meeting revealed plans to maintain current interest rates until 2026, which has bolstered the EUR/USD pair.
Euro Benefits From Rate Expectations
The euro benefits from reduced expectations of further ECB rate cuts. This likelihood supports upward pressure on the EUR/USD pair. A confirmed break through the 200-day SMA supports a positive forecast. US macroeconomic data could influence further EUR/USD movement. Traders await the ISM Manufacturing PMI and Eurozone PMIs for potential market direction.
In the past week, the USD showed varied performance against other major currencies. It was strongest against the Japanese Yen, while weakest against the New Zealand Dollar. The chart provides a comparative view of percentage changes in currency valuations.
The EUR/USD is testing its 200-day moving average near 1.1600, a critical technical level for us. This strength is primarily driven by widespread US dollar weakness, as the market is increasingly convinced the Federal Reserve will cut interest rates later this month. This policy divergence with the European Central Bank, which appears to be holding firm, presents a clear opportunity.
We just saw the November US jobs report come in weaker than anticipated at 155,000, while the latest core PCE inflation reading softened to 2.8%. These figures strongly support the narrative for a dovish Fed pivot in December. This makes it challenging to be bullish on the US dollar against its major peers.
Eurozone Resilience Supports Euro
Meanwhile, recent data from the Eurozone has been more resilient, with flash HICP inflation for November holding steady at 2.6%, beating expectations for a slight decline. Germany’s industrial production also showed a modest uptick last month, suggesting the bloc’s economy is stabilizing. This reinforces the view that the ECB will keep its policy restrictive for longer, lending further support to the euro.
For traders, this suggests positioning for a continued move higher in EUR/USD. We are looking at buying call options expiring in January or February 2026 to capitalize on a decisive break above the 200-day average. A more conservative play would be a bull call spread, which could lower the entry cost while defining risk.
This situation reminds us of the market dynamic we observed back in mid-2019. During that period, the Fed began an easing cycle while the ECB held rates, leading to a sustained period of dollar underperformance. That historical pattern provides a useful guide for how this trend could play out if the Fed proceeds with the expected rate cut.
