EUR/USD wavers without a clear direction, with the Fed in focus
- EUR/USD finds support near 1.1750 after pulling back from three-month highs past 1.1800.
- Growing geopolitical risks are likely to limit the Euro's upside attempts.
- Investors await the release of the minutes of the last Fed Monetary policy meeting.
EUR/USD posts marginal losses on Tuesday, trading near 1.1765 at the time of writing amid the current market lull ahead of the New Year holiday. The common currency has found support not far from the three-month highs in the 1.1800 area, but the rising geopolitical tensions are weighing on risk appetite and keeping the Euro's (EUR) upside attempts limited.
The US Dollar, on the other hand, is on track to close its worst yearly performance in almost a decade. Monetary policy divergence between the European Central Bank (ECB), which seems to have reached the end of its easing cycle, and the US Federal Reserve (Fed), which is expected to cut rates between one and three times next year, underpins the pair, which shows a nearly 14% appreciation in 2025.
Against this background, the market awaits the US central bank to release the minutes of its December Monetary policy meeting, due at 19:00 GMT. The Fed delivered a widely expected rate cut two weeks ago and signalled 25 basis points of further cuts in 2026, amid a widely split monetary policy committee. Furthermore, Chairman Jerome Powell ends his term next May and will be replaced by a more dovish successor. All things considered, the market is betting on a significantly steeper easing cycle in the US.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.00% | -0.08% | 0.05% | -0.16% | 0.07% | -0.00% | |
| EUR | -0.04% | -0.03% | -0.11% | 0.01% | -0.21% | 0.04% | -0.02% | |
| GBP | -0.00% | 0.03% | -0.06% | 0.04% | -0.18% | 0.07% | -0.02% | |
| JPY | 0.08% | 0.11% | 0.06% | 0.13% | -0.09% | 0.14% | 0.10% | |
| CAD | -0.05% | -0.01% | -0.04% | -0.13% | -0.21% | 0.02% | -0.07% | |
| AUD | 0.16% | 0.21% | 0.18% | 0.09% | 0.21% | 0.24% | 0.20% | |
| NZD | -0.07% | -0.04% | -0.07% | -0.14% | -0.02% | -0.24% | -0.09% | |
| CHF | 0.00% | 0.02% | 0.02% | -0.10% | 0.07% | -0.20% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily Digest Market Movers: US Dollar's upside attempts remain limited
- The Euro (EUR) is picking up again following a shallow correction from three-month highs. The pair maintains its broader bullish trend intact, with market expectations of further Fed rate cuts keeping US Treasury yields and the US Dollar depressed.
- On the geopolitical front, the Russian government announced the revision of its negotiating position with Ukraine after accusing Kyiv of attacking one of Russian President Vladimir Putin's residences. Ukrainian authorities have denied the allegations, but the fate of the peace talks has come into question.
- In Asia, China has been carrying out military drills around the island of Taiwan, which are expected to continue on Tuesday. These maneuvers came a few days after the US announced an agreement to send a $11 billion weapons package to the island, an escalation of the tensions in an already volatile area.
- And if that was not enough, US President Donald Trump threatened another attack in Iran if the Islamic Republic attempts to rebuild its nuclear weapons program. These threats have had so far a limited impact on FX markets, but the growing geopolitical risks in the hottest regions of the world are likely to keep risk appetite subdued and limit the Euro's upside attempts.
- Preliminary inflation data released on Tuesday has shown that Spain's Harmonized Index for Consumer Prices eased to a 3% yearly pace in December, from 3.2% in November. The figures came in line with the market consensus, and therefore, the impact on the EUR was marginal.
- In the US on Monday, Pending Home Sales increased 3.3% in November, with purchasing contracts reaching their highest level in three years. Homebuying accelerated from the 2.4% monthly rise seen in October, against expectations of a slowdown to 1%. The data's positive impact on the US Dollar, however, was minimal.
Technical Analysis: EUR/USD hovers above trendline support
The EUR/USD pair's reversal from last week's high at 1.1808 has found support at the ascending trendline support from mid-November lows, now at 1.1760. Upside attempts, however, remain limited, with technical indicators showing a mild bearish momentum. The 4-hour Relative Strength Index (RSI) is hovering around neutral levels, and the Moving Average Convergence Divergence (MACD) indicator remains below zero, although showing a flattening curve.
Bears are facing support at the convergence of the mentioned trendline, around 1.1760, and Tuesday's lows at 1.1750. A confirmation below this level is needed to challenge the broader bullish trend and bring the December 17 and 19 lows, near 1.1700, into focus.
To the upside, immediate resistance is at the 1.1805 area, where the pair was capped on December 16 and 24. This level is likely to challenge bulls ahead of the September 23 and 24 highs near 1.1820. Further up, the 161.8% Fibonacci extension of the December 19-24 rally, at 1.1863, emerges as a plausible target.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
