EUR/USD climbs toward $1.17 as Fed easing bets and Eurozone politics lift sentiment

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Euro climbs toward 1.17

Highlights

- Euro rebounds toward 1.17 amid softer dollar and Fed easing expectations.

- French policy delay eases Eurozone political risks, lifting sentiment.

- Technical breakout above 1.1679 could open path toward 1.18.

Traders now view the move as a potential shift in short-term momentum, supported by expectations of U.S. rate cuts and easing political tensions in Europe.

Technical rebound gains traction

On the charts, EUR/USD has broken above the descending trendline that had capped upside moves since mid-September. Price action now hovers around the 1.167 zone, with key resistance at 1.168 where the 200-EMA converges — a level seen as critical for confirming a bullish continuation. A sustained close above this point could extend the recovery toward 1.173 and then 1.183, aligning with prior supply zones and a Fibonacci retracement cluster.

EUR/USD price analysis (Source: TradingView)

Momentum signals are improving but not yet decisive. The RSI has climbed to 60, suggesting a shift toward bullish control after prolonged neutrality, while the shorter-term 20- and 50-day EMAs are starting to curl upward. However, the longer-term EMAs remain overhead, emphasizing that this is still an early-stage recovery rather than a confirmed trend reversal. A failure to hold above 1.162 could return the pair to the 1.154 floor, which remains the main structural support.

Macro backdrop supports the euro

Beyond technicals, macro factors are tilting in favor of the euro. French Prime Minister Sébastien Lecornu’s decision to postpone contentious pension reforms has eased domestic political uncertainty, reducing near-term risk premiums across European assets. Meanwhile, the U.S. dollar remains under pressure following dovish Federal Reserve commentary and weaker Treasury yields.

Market participants are increasingly pricing in a 50-basis-point rate cut by the Fed before year-end, with the Beige Book highlighting labor market weakness across regional economies. Fed Chair Jerome Powell acknowledged this “softness” during his remarks on Tuesday, further reinforcing expectations of policy easing. The resulting divergence between Fed dovishness and relative Eurozone stability is giving the euro a near-term edge, even as global trade risks persist amid renewed U.S.-China tensions.

Outlook

EUR/USD now faces a defining moment at the 1.168 threshold. A breakout would strengthen the case for an extended recovery toward 1.18 and potentially the mid-summer highs near 1.183. Conversely, rejection at this level could drag the pair back toward 1.154, where the broader structure remains vulnerable to renewed selling.

Previously, we noted that the euro’s defense of the 1.155 Fibonacci base was a crucial signal of market resilience amid dollar dominance. That foundation has now evolved into a launchpad for recovery, with the latest rally confirming that buyers are regaining tactical control. However, traders remain cautious as global trade frictions and shifting Fed policy expectations continue to dictate near-term volatility.

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