EUR/USD edges higher as Fed cut bets rise ahead of key PMI data

Traders Union
All News
Financial News
EUR/USD rate outlook

Highlights

- EUR/USD holds near $1.1525 as the U.S. dollar cools.

- Fed cut odds jump to 70 percent after dovish signals.

- ECB stability provides a counterweight as the euro defends support.

The shift came after comments from New York Fed President John Williams, who said there is room for “further adjustment” to interest rates. His tone helped trigger a softening across U.S. yields and drove futures markets to assign a 70 percent probability of a December cut, up from levels seen late last week. With the European Central Bank holding a steady, cautious stance, policy expectations have tilted in favor of the euro in the near term.

Dollar softens as policy divergence widens

The support zone between $1.147 and $1.15 continues to act as the main floor for EUR/USD. This band aligns with the lower Bollinger Band and the 38.2 percent Fibonacci retracement of the recent decline. Friday’s rebound from the descending channel support that has guided the pair since September suggests bearish momentum is slowing.

EUR/USD price dynamics (Source: TradingView)

Still, upside progress remains constrained. The 20-day EMA at $1.156 has capped every attempt to recover over the past month. A break above this level is required for buyers to force a structural shift. The next resistance cluster sits between $1.1576 and $1.165, including the 50-day EMA at $1.16. Together, these levels form the barrier that EUR/USD must clear to signal a medium-term reversal.

Fed messaging continues to shape expectations. While officials such as Susan Collins and Lorie Logan signaled that policy adjustments should proceed cautiously, the labor market conditions Williams highlighted have pushed futures traders toward a more dovish outlook. The dollar has softened accordingly, with each move lower in yields giving the euro space to stabilize despite technical constraints.

Euro supported by ECB steadiness but recovery remains fragile

The ECB is expected to maintain current rates through 2025 and likely into 2026, according to economist surveys. President Christine Lagarde’s recent remarks emphasized vigilance rather than easing, helping anchor the Euro in an otherwise volatile macro environment.However, the recovery remains dependent on upcoming U.S. data. The 20-day and 50-day EMAs still slope downward, keeping the short-term trend tilted to the bearish side. A sustained close above $1.156 is needed to force short-covering and expose the 61.8 percent retracement near $1.166. That level capped multiple rallies in September and October and would serve as the true pivot for a broader recovery.

If buyers fail to defend $1.147, the next downside target lies at $1.142, which marks the September swing low and the lower edge of the broader annual range. A break below that level would weaken the structure significantly and expose support near $1.138.

Outlook

EUR/USD holds a tentative advantage as expectations for a December Fed cut rise, but the recovery remains delicate. Macro signals are providing the lift, not a technical breakout. The next 48 hours, driven by U.S. PPI and retail sales, will determine whether the pair can push toward resistance or fall back toward the lower edge of the channel.

Only a decisive move above $1.156 and a sustained reclaim of the 50-day EMA would confirm that bullish momentum is taking hold.In earlier coverage, we noted that EUR/USD’s stability depended on the dollar losing policy traction and the pair defending the $1.15 floor. This dynamic is now playing out, but without a breakout above the EMA cluster, the pair remains vulnerable to renewed dollar strength.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.