EUR/USD Update

The EUR/USD pair has seen a slight decline but is currently hovering around 1.1730, not too far from its recent peak of 1.1762. Investors seem to be exercising caution, particularly with upcoming delays in key US economic data and anticipated decisions from the European Central Bank (ECB).

This currency pair has been consolidating its gains after a nearly 2% rise over the past three weeks. A lot of this movement can be attributed to the Federal Reserve’s recent interest rate cut and the potential replacement of Fed Chair Jerome Powell—something that some believe could shift future monetary policy to a more dovish stance.

In this context, traders appear to be on edge during Monday’s Asian session, hesitant to make bold moves ahead of significant economic reports due later in the week. These include the delayed US nonfarm payrolls report and the Consumer Price Index, both scheduled for Tuesday and Thursday, respectively. Additionally, the ECB is expected to unveil its own monetary policy changes on Thursday.

Market Movements: Monetary Policy Divergence Affects Euro

• The euro has managed to hold on to most of its gains recently due to differing monetary policies between the ECB and the Federal Reserve. While the Fed may cut rates in 2026, the ECB is hinting at potentially raising rates soon.
• In a recent interview, President Trump endorsed Kevin Warsh as the top candidate to succeed Powell when his term finishes in May, also mentioning economist Kevin Hassett as a contender. Trump asserted that whoever leads the central bank should consider his recommendations on interest rates.
• Chinese economic data released early Monday indicated an unexpected slowdown in industrial production, with retail growth at its lowest in nearly two years, raising concerns about the health of the economy and dampening risk appetite during the Asian session.
• Moreover, news emerged that China Vanke, a state-backed developer, is facing challenges that could lead to bankruptcy, stirring worries about the overall real estate market in China and impacting investor sentiment.
• The focus for Monday in the Eurozone will be on industrial goods data, which is predicted to show a modest growth of 0.1%, building on a prior 0.2% increase.
• In the US, the Empire State Manufacturing Index is projected to drop to 10.6 for December from 18.7 in the previous month. Public appearances by Federal Reserve officials could also provide insight into future monetary policies.

Technical Analysis: EUR/USD Consolidates Gains

The EUR/USD pair is currently trading within a limited range below last week’s high of 1.1762. This recent consolidation allows the 4-hour Relative Strength Index to retreat from overbought conditions, even as it remains aligned with a generally bullish outlook. However, the Moving Average Convergence Divergence (MACD) is signaling that a bearish crossover might happen soon, which suggests that further corrections could be on the horizon.

Immediate support is identified near the low from December 12 at 1.1720, while support levels below include Thursday’s low around 1.1680 and the low from December 9 at 1.1615. On the upside, traders will focus on the recent high of 1.1762 from December 11 and the 1.1780 level from October 1 as potential resistance points. Further targets include highs around 1.1820 noted on September 23 and 24.