The EUR/USD currency pair experienced a decline during the Asian session, with spot prices trading around 1.1660-1.1655. This comes after reaching its highest level since 17 October, due to the US Dollar’s modest recovery from late October lows.
Expectations of a dovish approach from the Federal Reserve have limited the USD’s rise, as recent US data indicated an economic slowdown and labour market weakening. This has increased the likelihood of a 25-basis-point rate cut at the next FOMC meeting. Meanwhile, perceptions that the European Central Bank has ended its interest rate cuts provide support for the Euro.
Technical Analysis
Technically, a break through the 100-day Simple Moving Average for EUR/USD has been pivotal, showing an upward trend. The focus now shifts to upcoming US economic indicators, such as Challenger Job Cuts and Weekly Initial Jobless Claims, which precede key US inflation data.
The heat map illustrates percentage changes in major currencies, with the US Dollar showing the strongest gain against the Japanese Yen. Users can observe the currency’s performance in relation to others, offering a clearer view of current market dynamics.
We are seeing a clear split between the Federal Reserve and the European Central Bank’s expected actions. This policy divergence is likely to be the main driver for the EUR/USD in the coming weeks. Any dips toward the mid-1.1600s should be viewed as potential entry points for long positions.
The case for a Fed rate cut next week is growing stronger, with US inflation having cooled to 3.1% in November 2025. We have also seen the labor market soften, as job openings recently dropped to their lowest level in over two years at 8.7 million. This has led markets to price in a high probability of a rate cut, with CME’s FedWatch tool showing odds above 60% for a 25-basis-point reduction.
ECB Policy Stance
Meanwhile, the European Central Bank appears to be on hold, giving the euro a supportive base. Eurozone inflation has moderated significantly, with the recent Harmonised Index of Consumer Prices (HICP) figure for November 2025 coming in at just 2.4%. This aligns with the view that the ECB has finished its cutting cycle for now and will wait for more data before acting.
For derivatives traders, this suggests a strategy of buying call options on the EUR/USD to capitalize on the expected upward trend. Selling out-of-the-money put options could also be considered to collect premium, given the strong support above the 1.1600 level. We anticipate that implied volatility may rise heading into next week’s FOMC meeting and Friday’s US inflation report.
The technical picture supports this bullish outlook, as we recently saw a decisive break above the 100-day Simple Moving Average. This level could now act as a dynamic support for any corrective pullbacks. Traders should remain alert for the US jobless claims figures today and the critical inflation data on Friday, as any surprises could cause short-term price swings.
