EUR/USD rallies with US manufacturing data and Fed speakers in focus

EUR/USD is rallying ahead of Monday's US session opening, trading above 1.1750 at the time of writing, with last week's high, at 1.1762, at a short distance. The pair has been boosted by an unexpectedly strong Eurozone's Industrial Production release, which has improved the market mood, ahead of the release of New York manufacturing data and some speeches from Fed officials due later on the day

Data released by Eurostat earlier on Monday revealed that the region's factory output growth accelerated to 0.8% pace in November, from 0.2% in October, beating expectations of a 0.1% growth. Year-on-year, industrial production increased 2%, from the 1.2% growth seen in October.

From a wider perspective, the EUR/USD keeps consolidating gains after rallying nearly 2% over the last three weeks. Investors' bets on further rate cuts by the US Federal Reserve (Fed) and the highly likely replacement of Chairman Jerome Powell by a more dovish chair keep US upside attempts limited for now.

Traders, nevertheless, maintain a cautious mood, reluctant to take excessive risks ahead of key macroeconomic releases later this week, namely the delayed October and November's US Nonfarm Payrolls (NFP) reports on Tuesday, and November's Consumer Prices Index (CPI) on Thursday. In between, the ECB will release its monetary policy decision also on Thursday.

Daily Digest Market Movers: Monetary policy divergence supports the Euro

• The Euro (EUR) holds most of the gains from the last three weeks on Monday, supported by the divergence in monetary policy between the ECB and the Fed. The Fed is expected to cut rates at least once in 2026, while the ECB has suggested that the next monetary policy change might be a rate hike.
• On Friday, President Trump stated in an interview that former Fed Governor Kevin Warsh is the best-positioned candidate to replace Chairman Powell at the end of his term in May. Trump has also mentioned White House economist Kevin Hassett as a candidate for the job. The President also said that the next central bank Chair should listen to his opinion when deciding the future direction of interest rates.
• Data from China released earlier on Monday revealed that Industrial Production slowed down against expectations in November, while retail consumption grew at its lowest pace in nearly two years. These figures have renewed concerns about the health of the world's second-largest economy and hammered risk appetite during the Asian session.
• Also in China, news that the state-backed property developer China Vanke is struggling to find a way to avoid bankruptcy has brought concerns about the country's property sector back to the table, further souring market sentiment.
• In the US, the NY Empire State Manufacturing Index is seen dropping to 10.6 in December from 18.7 in the previous month. After that, Fed Governor Stephen Miran and New York Fed President John Williams will appear in public and might give further clues about the central bank's monetary policy plans.

Technical Analysis: EUR/USD consolidates gains after a sharp rally

The EUR/USD is trading within recent ranges, right below the multi-month highs of 1.1762 hit last week. This consolidation phase is allowing the 4-Hour Relative Strength Index (RSI) to retreat from overbought territory, yet still standing at levels consistent with a solid bullish trend. The Moving Average Convergence Divergence (MACD) indicator, however, shows an impending bearish cross, suggesting that a further correction might be ahead.

Immediate support is at the December 12 low, near 1.1720. Beyond that, Thursday's low, at the 1.1680 area, and the December 9 low at 1.1615 will come into focus. To the upside, the December 11 high, at 1.1762, and the October 1 peak at around 1.1780 are likely to challenge bulls. Further up, the target is the September 23 and 24 highs near 1.1820.