EUR/USD Trading Update
The EUR/USD pair has recovered from recent dips, now trading close to 1.1720, reflecting a high not seen in nearly two months. The shift in market sentiment is favoring the euro, while the US dollar appears to be lagging behind as traders assess the dovish stance of the US Federal Reserve announced on Wednesday.
Interestingly, despite a cautious outlook from Oracle about sales and earnings, which raised concerns over AI sector valuations, investors are looking past this risk. European stock markets managed to turn positive after an initial dip, although Wall Street futures are still in the red.
On Wednesday, the US dollar, which had seen a period of weakness, experienced a minor uptick following the Federal Reserve’s less aggressive monetary policy than anticipated. The Fed lowered interest rates by 25 basis points, which was anticipated. However, there was minimal opposition from more hawkish members, with Chairman Jerome Powell adopting a softer approach to inflation and hinting at a potential rate cut in 2026.
Looking ahead, Thursday’s data on new US unemployment claims will be under scrutiny to determine whether the previous week’s decline was merely a holiday-related anomaly or indicative of an improving labor market.
Market Moves: Dovish Fed Impacts US Dollar
- The Federal Reserve reduced interest rates by 25 basis points to a range of 3.50% to 3.75%. Current projections suggest only one more rate cut in 2026. The Fed’s internal voting members showed significant support for the cuts, and Powell’s remarks imply further rate cuts could happen next year.
- Markets are also considering the possibility of Kevin Hassett, known for his dovish views, succeeding Powell when his term ends in May. He mentioned recently there’s “plenty of room” for further cuts.
- The Fed is set to begin an initial $40 billion bond-buying program on December 12 to enhance market liquidity, a move that has unnerved some investors and put additional pressure on the dollar.
- In Europe, ECB President Christine Lagarde reiterated that their monetary policy is stable, hinting that growth forecasts might be raised again, which could signal the end of the easing cycle.
Technical Insights: EUR/USD Bulls Eyeing 1.1730
The technical outlook for EUR/USD looks optimistic after overcoming resistance around 1.1680. Current indicators, like the 4-hour MACD, are showing strong bullish momentum, and the RSI remains positive but not yet overbought. With the US dollar weakening, further gains could be on the horizon.
The pair has settled above 1.1705, with short-term targets set around the October 17 high near 1.1730. Looking a bit further, the next objective might be the October 1 high at 1.1780. On the downside, vital support levels include the December 4 high at around 1.1680 and lows from December 1 and 2 near 1.1590.
Upcoming Economic Indicators
Initial Unemployment Claims
This measure indicates the number of individuals applying for state unemployment benefits for the first time, as reported by the US Department of Labor. A higher figure might suggest weakness in the labor market, negatively affecting the US economy and the dollar. Conversely, a decline in claims would be seen as a positive sign for the dollar.
Next Release: Thursday, December 11, 2025, at 13:30
Frequency: Weekly
Consensus: 220K
Previous: 191K
