The EUR/USD pair is experiencing some decline as it approaches midday in Europe, currently hovering around 1.1585 after an earlier attempt to surpass 1.1600 failed. The consumer confidence data from the Eurozone didn’t catch many by surprise, but market optimism about potential monetary easing by the Federal Reserve in the near future is keeping demand for the dollar in check.
Recent U.S. economic reports showed a more robust than anticipated increase in durable goods orders and a drop in new jobless claims. Still, there’s an expectation that the Fed might reduce interest rates by 25 basis points post the December meeting.
Moreover, there’s speculation that Kevin Hassett, who holds a dovish stance as the National Economic Council Chairman, could succeed Jerome Powell as Fed Chair when his term wraps up in May. This has led to heightened expectations that the Fed may implement at least two or three rate cuts in 2026.
With U.S. markets closed for the Thanksgiving holiday, trading volumes are likely to be subdued on Thursday. Meanwhile, the European Central Bank’s (ECB) minutes from its recent monetary policy meeting might shed light on the euro’s direction.
Monetary policy differences continue to weigh on USD strength
- Many central banks across the globe are nearing the end of their easing cycles, and the Fed is widely predicted to lower rates by at least a percentage point over the upcoming year. Unless there’s a significant change, this outlook of reduced yields could dampen speculative interest in the U.S. dollar.
- Consumer confidence held steady in November, reported at -14.2, according to the European Commission. At the same time, industrial confidence slightly worsened, slipping to -9.3 from -8.5 last month, although service sentiment saw an increase, rising to 5.7 from 4.2.
- A report on Germany’s GfK Consumer Confidence for December showed a small uptick, moving from -24.1 in November to -23.2, but the euro’s reaction was minimal.
- In the U.S., durable goods orders increased by 0.5% in September, following a revised 3% rise in August, surpassing the predicted 0.3% uptick. Orders excluding transportation saw a 0.6% rise, also exceeding expectations of 0.2%.
- Weekly new jobless claims in the U.S. fell to a seven-month low of 216,000, down from 222,000 the previous week, defying forecasts that suggested a modest rise to 225,000.
- The ECB is also set to release the minutes from its October 30 monetary policy meeting, during which the committee decided to keep the benchmark interest rate steady at 2.0%.
Technical analysis: EUR/USD encounters resistance above 1.1600
The EUR/USD has been trending positively since it hit around 1.1500, yet the upper boundary of the descending channel from early October, currently around 1.1620, may act as a key hurdle for euro buyers.
Indicators appear optimistic, with the four-hour Relative Strength Index (RSI) around 60 and the Moving Average Convergence Divergence (MACD) maintaining an upward trajectory above the zero line. However, a breakthrough above the mentioned resistance at 1.1620 is necessary for bullish confirmation and to target October 28 and 29 highs near 1.1670 and the October 17 high around 1.1730.
On the downside, immediate support rests at the previous resistance point of 1.1550, reflecting the highs from November 21 and 24. Further down, the psychological barrier at 1.1500 and the November 5 low near 1.1470 will serve as support ahead of the channel’s lower boundary, which is around 1.1420.
