The US dollar has been weakening broadly since last week’s Federal Open Market Committee (FOMC) meeting. The Federal Reserve cut interest rates by 25 basis points as expected and signalled that further rate cuts would require stronger justification. However, Fed Chair Jerome Powell’s press conference was perceived as relatively dovish. Rather than maintaining a strictly neutral tone and emphasising data-dependency, Powell downplayed inflation risks and highlighted labour market weakness, implying the Fed is more tolerant of above-target inflation than a weakening labour market.
This week, trader focus shifts to the key US economic data releases: the Non-Farm Payrolls (NFP) report and Consumer Price Index (CPI) data. These will be the last significant reports before year-end holiday trading slows. Current market pricing anticipates 57 basis points of monetary easing by the end of 2026. Strong US data, especially robust employment figures, could trigger a hawkish repricing and strengthen the dollar. Conversely, weaker data would likely weigh on the USD, accelerating expectations of rate cuts.
Turning to the euro, the European Central Bank (ECB) is widely expected to maintain its current interest rates and adopt a neutral stance in its upcoming policy announcement. ECB officials have consistently stated that current policy settings are appropriate and that they will not react to minor or temporary deviations from their 2% inflation target. Furthermore, the bank has signalled that future moves could involve either rate hikes or cuts, depending on economic developments. Recent data support this cautious, neutral approach, and markets are even starting to factor in a possible rate hike next year.
Looking at EUR/USD technicals, daily charts show the pair has broken above a key swing level at 1.1728, opening the way for a potential move towards the next resistance at 1.1778. For risk management, buyers may find a more favourable risk-to-reward setup around the major trendline for positioning towards new highs. Sellers, meanwhile, will monitor for breaks below these key levels to add to bearish positions targeting new lows.
On the four-hour chart, price action is consolidating just above the 1.1728 level. Buyers are likely to defend this support and push towards 1.1778, while sellers will be watching for a break below to trigger a deeper retracement back to the major trendline.
The one-hour chart reveals a tight range between support at 1.1728 and resistance near 1.1750. Market participants are expected to trade within this range until a clear breakout occurs on either side. Red lines on the chart indicate today’s average daily range.
Key upcoming economic events include Eurozone Flash PMIs and the US NFP report tomorrow, followed by the ECB rate decision and US CPI release on Thursday. These are likely to be critical catalysts influencing EUR/USD movement in the short term.
Original Source: Giuseppe Dellamotta of investinglive.com
