EUR/USD jumps past $1.163 as dollar weakens ahead of key U.S. data and Fed decision

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EUR/USD ahead of U.S. data

Highlights

- EUR/USD climbs above 1.1630, marking its sixth straight daily gain.

- Eurozone manufacturing PMI falls to 49.6, but euro demand remains firm.

- Dollar weakens as markets price an 87% chance of a Fed rate cut next week.

Despite Eurozone manufacturing PMI slipping to a five-month low at 49.6, the euro remains well-bid as traders rotate out of the dollar ahead of a dense U.S. data calendar. The broader tone remains dominated by shifting monetary expectations. Softer U.S. figures following the government shutdown and dovish signaling from Federal Reserve officials have weakened the dollar across major pairs.

Political developments have added weight to this repricing, with growing speculation that President Donald Trump may nominate Kevin Hassett — widely viewed as dovish — as the next Fed chair. The heat map reflects this shift clearly, showing the euro gaining against most peers, particularly the New Zealand dollar.

Technical recovery strengthens as EUR/USD breaks out of descending channel

On the daily chart, the euro has broken decisively above the upper boundary of its descending channel, marking its strongest bullish signal in more than a month. The breakout comes after a higher low formed near 1.15 last week, signaling exhaustion of the prior downtrend. With price now pushing above the 0.382 Fibonacci retracement at 1.1562, the pair is testing levels that previously capped much of November’s consolidation.

EUR/USD price dynamics (Source: TradingView)

Attention now turns to the confluence zone near 1.1651–1.1669, where the Supertrend resistance meets the 0.618 Fibonacci retracement. This band is expected to act as a heavy barrier, and a clear break above 1.167 would open the next leg toward the 0.786 retracement at 1.1728, a region that stopped multiple recoveries between August and October.

Momentum indicators reinforce the improving structure. RSI has climbed to 58.9, its sharpest rise since early October, and remains far from overbought territory. Price has also crossed above the Ichimoku cloud base for the first time in weeks, hinting at an early structural shift. A close above the full cloud this week would mark EUR/USD’s strongest technical signal since July.

Macro expectations drive the move as traders await U.S. ISM and inflation data

Market attention now shifts to the U.S. ISM Manufacturing PMI, which will be closely watched for confirmation of softening economic momentum. A weaker-than-expected print would likely deepen dollar pressure and drive EUR/USD toward the critical 1.165–1.167 resistance pocket. Traders will also monitor the prices-paid component, which feeds directly into inflation expectations and could influence the tone of next week’s Federal Reserve decision.

Beyond today’s release, the calendar is packed with Eurozone inflation data, U.S. services PMIs, ADP labor numbers, and Friday’s key PCE report. Each data point carries potential to reinforce or disrupt the pair’s renewed bullish momentum. For now, sentiment remains tilted against the dollar, allowing the euro to rally even as Eurozone data underperforms.

In the near term, support sits at 1.155, followed by the structural floor at 1.15. As long as the pair holds above the descending-channel breakout, EUR/USD retains a bullish bias heading into a pivotal week for monetary policy.

In earlier coverage, we noted that EUR/USD’s repeated failures near the upper channel boundary signaled building breakout pressure. This week’s move above 1.163 confirms that dynamic, with dollar weakness and shifting Fed expectations providing the catalyst for the long-awaited upside extension.

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