EUR/USD edges higher as dollar falters after U.S. shutdown deal and weak jobs data

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EUR/USD amid cautious Fed tone

Highlights

- EUR/USD consolidates near 1.1580 after six-day rally.

- Labor market weakness pressures the dollar.

- ECB maintains steady tone, limiting euro volatility.

On the daily chart, EUR/USD has extended its recovery from the 1.1450 support region, reclaiming the 20-day EMA at 1.1584 and testing the upper boundary of its descending channel. The next key resistance lies near 1.1619, where the 50-day EMA and the 38.2% Fibonacci retracement of the 1.1822–1.1386 decline converge. A close above this area could validate a bullish breakout toward 1.1726, overlapping with the 78.6% retracement and a prior swing high.

EUR/USD price dynamics (Source: TradingView)

The Parabolic SAR flipped below price for the first time since late October, signaling a short-term momentum shift. Price stability above 1.1579, which aligns with the 100-day EMA, reinforces a mildly bullish bias. However, traders remain cautious as the pair approaches overbought levels following its strongest weekly advance in nearly two months.

Dollar drifts as Fed tone divides and jobs data disappoints

The greenback’s weakness stems from deteriorating labor trends and uncertainty over policy direction. The ADP Employment Report showed U.S. private employers cutting an average of 11,000 jobs per week in late October, while Challenger layoffs more than doubled month over month. These indicators support expectations for a December rate cut, though recent comments from Fed officials Raphael Bostic and Susan Collins have slightly tempered those bets.

According to the CME FedWatch Tool, the implied probability of a 25-basis-point cut has slipped from 67% to 60%, reflecting a market split between dovish data and hawkish caution. This policy divergence has kept the dollar index range-bound, allowing the euro to firm even as traders refrain from fully pricing in a prolonged tightening cycle reversal.

ECB calm reinforces euro stability

In Europe, ECB Executive Board member Isabel Schnabel reiterated that interest rates are “absolutely appropriate,” signaling confidence in the bank’s stance amid stable inflation and moderate growth. The lack of urgency to ease policy has lent the euro a degree of relative strength against the dollar, especially as the U.S. faces a decelerating economy.

The euro’s current consolidation reflects equilibrium between two contrasting forces — a cautious ECB anchored by steady data and a U.S. central bank navigating economic softness. For now, investors are unwinding defensive dollar positions built during the shutdown standoff, further supporting near-term euro demand.

Outlook and previously discussed levels

Technically, EUR/USD faces a decisive test near 1.1619, the zone that separates consolidation from a potential trend reversal. A sustained daily close above this resistance could open the door to 1.172–1.173, while a move back below 1.155 may trigger renewed selling toward 1.1473 and the 200-day EMA at 1.141.

Previously discussed analysis identified the 1.145–1.147 area as the key accumulation base, which remains intact. As long as price holds above 1.15, the broader outlook favors gradual appreciation toward the upper boundary of the 1.145–1.172 corridor.

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