EUR/USD steadies at $1.156 as traders bet on Fed cuts and watch Washington shutdown drama

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EUR/USD holds near 1.16

Highlights

- EUR/USD hovers near 1.1560 after four days of gains.

- U.S. Senate advances funding bill, boosting dollar sentiment.

- ECB’s cautious stance offers support while Fed cut expectations grow.

The move lifted the dollar across the board, cutting short the euro’s four-day rebound as traders recalibrated positions ahead of key economic data.

Technical setup shows downside pressure

On the daily chart, EUR/USD remains confined within a descending channel that has guided the October–November downtrend. The pair failed to break the upper boundary last week, leaving sellers in control. Price now trades just above the mid-channel region and Fibonacci support near 1.1520–1.1550, which has acted as a pivot area in recent sessions.

EUR/USD price dynamics (Source: TradingView)

A sustained hold above this zone keeps downside risk contained. However, the 20-day EMA near 1.1580 and 38.2% Fibonacci retracement at 1.1588 form a near-term resistance cluster. The 50-day EMA at 1.1620 marks the key level for a structural shift in momentum. Until the pair closes above this threshold, the broader trend remains bearish.

The RSI continues to hover below the midpoint at 50, suggesting momentum still favors sellers. Despite temporary stabilization, rallies are corrective rather than directional, with the 200-day EMA at 1.1405 providing final major support if pressure resumes.

Dollar gains but rate outlook limits upside

The dollar’s latest advance was driven by optimism that the shutdown may soon end, yet broader sentiment remains constrained by expectations of monetary easing. According to CME FedWatch, markets now assign a 62% probability of a 25 bps rate cut in December. Fed Governor Stephen Miran told CNBC that progress on inflation and weakening employment trends justify a more accommodative stance, even hinting that a 50 bps cut remains possible if growth data deteriorates further.

This dovish outlook caps the dollar’s upside potential. Meanwhile, the European Central Bank maintains a cautious but steady tone. ECB Vice President Luis de Guindos said current rates remain “appropriate” as inflation stays near target and economic uncertainty eases following improved trade dialogue. Money markets are not pricing in any potential ECB cuts until late 2026, giving the euro some underlying resilience despite near-term weakness.

Focus turns to ZEW data and shutdown resolution

Attention now shifts to Germany’s ZEW Survey, which could provide the next directional cue. A stronger confidence reading could help EUR/USD retest 1.1580, and potentially 1.1620, the breakout level that determines whether bulls can regain short-term momentum. Conversely, failure to hold the mid-channel area risks a slide toward 1.1450 or the long-term support near 1.1405.

For now, the pair trades defensively inside the channel as traders balance near-term U.S. fiscal developments with shifting monetary expectations on both sides of the Atlantic.

In earlier analysis, EUR/USD’s rejection from the 1.17 area and repeated failures at the descending channel’s upper boundary were identified as early signals of sustained bearish momentum. The current pullback validates that structure. As long as price remains capped below 1.1620, EUR/USD continues to trade in a controlled downtrend with limited bullish follow-through.

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