EUR/USD Price Forecast: Bulls need to clear 1.1660 to allow for extra gains
- EUR/USD hits weekly highs past 1.1600 just to deflate afterwards.
- The US Dollar maintains a vacillating trade amid the widespread lack of volatility.
- The ECB Accounts suggested caution rather than urgency.
EUR/USD struggled to build on its weekly rebound on Thursday, with global markets largely drifting into consolidation mode as US trading thinned out for the Thanksgiving holiday.
Furthermore, the pair’s choppy price action mirrors the uncertain tone in the US Dollar (USD), even as expectations for additional Federal Reserve (Fed) rate cuts continue to underpin the broader backdrop.
That said, the US Dollar Index (DXY) is stuck near multi-day lows around 99.60, swinging between small gains and losses after several days of declines, including a break below its 200-day SMA at 99.74.
Shutdown off… but the clock’s already ticking
Washington may have reopened after a 43-day government shutdown, but no one’s pretending this is a permanent fix. Lawmakers simply agreed to keep the government funded until January 30, which means another political standoff is already pencilled in.
What’s different this time is who drew the line. Budget fights usually feature Republicans demanding tighter spending, but Democrats were the ones holding firm, arguing the pause was needed to highlight rising healthcare insurance costs hitting 24 million Americans. Republicans countered that the stunt caused needless disruption, with delayed benefits, unpaid federal workers, and stalled services, while the national debt keeps climbing toward $38 trillion, rising around $1.8 trillion every year. Not exactly a sustainable backdrop.
Diplomacy gets a flicker of hope
There’s also a bit of movement on the geopolitical front. Ukraine’s President Volodymyr Zelenskiy indicated he’s ready to work with a US-backed plan to move peace talks with Russia forward, and said he’s open to speaking directly with President Trump to resolve sticking points. He stressed key European players should also be involved.
Trump, speaking separately, suggested a deal is “getting close”, though without details.
There’s even talk that Zelenskiy may travel to the US soon to push discussions along, but Washington hasn’t confirmed anything. Optimism is rising, but quietly: Russia continues to insist it won’t sign any agreement that doesn’t meet its objectives.
Fed: Not ready to jump into easing mode
The Federal Reserve delivered exactly what markets expected on October 29, a 25 basis point cut and a gentle restart of Treasury purchases to keep money markets running smoothly.
The vote came in at 10–2, bringing the Fed Funds Target Range (FFTR) to 3.75%–4.00%. The message was clear: this is insurance, not the start of a big cutting cycle.
Chair Jerome Powell reminded markets that opinions within the FOMC are still very split, and a December cut is not a done deal.
The Minutes reinforced that caution. Most policymakers saw a cut as appropriate, but others warned that easing too quickly could slow the path back to 2% inflation.
Even so, markets remain dovish-leaning, pricing a 79% odds of another cut on December 10, and around 86 basis points of easing by end-2026.
ECB: Happy to sit still for now
Across the pond, the European Central Bank (ECB) kept rates parked at 2.00% for a third straight meeting. With inflation and growth both near target, and the ECB having already delivered 200 basis points of cuts this year, policymakers see little urgency to tweak policy again.
President Christine Lagarde acknowledged that global risks have calmed a touch, thanks in part to the US–China trade thaw. But uncertainty remains elevated, and officials are reluctant to move prematurely.
Meeting Accounts released Thursday showed policymakers believe no further easing may be needed, and they’re certainly not rushing into rate cuts.
Markets agree: Pricing implies a nearly 98% probability of unchanged policy next month, with only minor easing expected through 2026.
Tech corner
EUR/USD’s rebound is holding up well so far this week, with the pair looking increasingly ready to clear the 1.1600 mark before long.
If buyers stay in control, the next upside level to watch is the November high at 1.1656 (November 13), which is supported by both the 55-day and 100-day SMAs. Beyond that emerge the weekly peaks at 1.1668 (October 28) and 1.1728 (October 17), before the October top at 1.1778 (October 1).
On the downside, a move back under the November base at 1.1468 (November 5) could shift attention towards the critical 200-day SMA at 1.1426, followed by the August floor at 1.1391 (August 1). A deeper retreat would expose the weekly low at 1.1210 (May 29) and then the May valley at 1.1064 (May 12).
For now, the pair’s broad tone remains constructive. Indeed, the Relative Strength Index (RSI) has nudged up past 52, signalling building momentum, although the Average Directional Index (ADX) near 12 still suggests the broader trend is not particularly strong just yet.
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Bottom line
EUR/USD has been drifting lower since peaking above 1.1900 in September, and the Eurozone still isn’t offering much to change the narrative. Until the Fed sounds more committed to easing, global sentiment improves, or investors find renewed love for European assets, the Euro (EUR) is likely to keep taking its cues from the US Dollar.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Author
Pablo Piovano
FXStreet
Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
