EUR/USD Forecast: Euro hits one-month high on Eurozone data, Fed easing divergence

EUR/USD trades around 1.1660 on Wednesday, up 0.30% on the day, supported by renewed demand for the single currency and a weakening US Dollar (USD). The pair extends its advance toward fresh one-month highs, helped by stronger European economic indicators and a widening policy gap in favor of the Eurozone.

Eurozone growth prospects improved further after the HCOB Services Purchasing Managers Index (PMI) for November was revised higher to 53.6 from 53.1, marking a fourth consecutive monthly expansion and the strongest reading since May 2023. The upward revisions were broad-based, with France rising to 51.4 and Germany to 53.1.

These data reinforce the firm stance of the European Central Bank (ECB). President Christine Lagarde told the ECON Committee of the European Parliament that growth should be supported by household spending and a resilient labor market, adding that underlying inflation remains aligned with the ECB’s 2% medium-term target.

The contrast with the Federal Reserve (Fed) is becoming increasingly pronounced. Markets are pricing an 85% chance of a 25-basis-point rate cut next week, with additional cuts expected in 2026. Speculation that White House adviser Kevin Hassett could replace Chair Jerome Powell, potentially steering policy toward further easing, has amplified this divergence.

US data released earlier in the day has also pressured the US Dollar. The ADP Employment Change report showed a loss of 32,000 jobs in November, compared with an expected gain of 5,000, highlighting growing weakness in the labor market. ADP noted that employers are facing cautious consumers and an uncertain macroeconomic backdrop.

Later today, attention turns to the Institute for Supply Management’s (ISM) Services PMI, expected to ease to 52.1 from 52.4 in October. Another decline in the employment sub-index, already contracting for the past five months, would reinforce concerns about a sharper slowdown in the US economy.

In this environment, the divergence between a firm-leaning ECB and a Fed preparing for deeper monetary easing continues to support the Euro (EUR). Should the ISM report disappoint, downside pressure on the US Dollar could intensify, potentially allowing EUR/USD to extend its recent upward momentum beyond current monthly highs.

EUR/USD Technical Analysis

In the 4-hour chart, EUR/USD trades at 1.1664, up for the day, 26 pips above the day opening price. The 100-period Simple Moving Average (SMA) is rising at 1.1582, and the pair holds above it, reinforcing a bullish bias. Relative Strength Index (RSI) at 71.45 is overbought and suggests momentum is stretched. Immediate resistance aligns at 1.1669, followed by 1.1728, and a sustained break could extend the advance.

Above the 100-period SMA, the bias stays firm. RSI has eased from 72.52 to 71.45, hinting at cooling momentum. The rising trend line from 1.1491 underpins the bullish tone, offering support near 1.1609. Additional support is seen at 1.1469. A dip into trend-line support could attract fresh bids and keep the uptrend intact.

(The technical analysis of this story was written with the help of an AI tool)