EUR/USD Holds 1.1051 at 19-Month Low as Fed Outpaces ECB; 1.1260 Upside Target in Play

EUR/USD traded at 1.1051 on Friday, against a previous close of 1.1055, after printing an intraday low of 1.1043, the weakest level for the pair since spring 2025 and a fresh low for 2026. The session opened at 1.1055, peaked at 1.1073 during the European morning and spent the rest of the day pinned inside a 30-pip band, with the euro failing to find any bid even after the U.S. producer price data came in softer than forecast.

The week has been one-directional. EUR/USD closed Monday, November 9, at 1.1224 after a 0.72% rally and touched 1.1252 early Tuesday. It then fell 0.53% to 1.1164 on Tuesday, 0.66% to 1.1090 on Wednesday and 0.32% to 1.1054 on Thursday. From Tuesday’s high to Friday’s low, the pair dropped 209 pips. Against the prior Friday’s close of 1.1144, the euro is down 0.83% for the week, its third consecutive weekly loss.

The longer trend is worse. EUR/USD is down 0.88% over the past month and 4.83% over the past 12 months. The pair traded as high as 1.2067 earlier in 2026, and its average rate through October was 1.1568. From the 2026 peak, the euro has lost 8.4%. Monthly averages tell the same story: 1.1590 at the end of August, 1.1514 at the end of September, 1.1203 at the end of October. The August 21 top at 1.1711 marked the start of the current leg lower, and the pair has shed 660 pips since then.

The driver is the dollar. The U.S. Dollar Index touched 103.30 on Friday, its highest level in 19 months, and traded at 103.24 around the PPI release. The greenback is on track for its strongest weekly gain since September. That strength has little to do with the euro area. The pound slid to 1.3238, the yen weakened to 160.10 per dollar, and every major currency lost ground against the greenback this week.

The euro is losing a rate race it should be competitive in. Both central banks are hiking. The European Central Bank raised its deposit rate in June and September to 2.50% and has signaled a December move. The Federal Reserve is priced for a hike at its December 8 and 9 meeting with a growing chance of a half-point step. The pair is trading on which central bank tightens faster and further, and the market has decided that answer is the Fed.

The cross rates confirm that this is a dollar story. EUR/GBP traded at 0.8361 on Friday, up 0.09%, showing the euro holding steady against sterling while both currencies slid against the greenback. When the dollar is the common denominator in every major pair’s decline, the bearish case for EUR/USD rests almost entirely on U.S. rates rather than on European weakness.

How the Week Broke: From 1.1252 to 1.1043 in Four Sessions

The week started with the euro on the front foot. EUR/USD climbed 0.72% on Monday to close at 1.1224 as the dollar slipped to a one-month low and U.S. Treasury yields fell on expectations that a divided Congress, decided in the November 3 midterm elections, would slow federal spending. The euro also drew support from comments by several ECB policymakers, including the heads of the German and Italian central banks, who said a December hike may be likely. The pair touched 1.1252 in early Tuesday trading.

Tuesday’s U.S. inflation data flipped the trade. The October Consumer Price Index rose 0.4% against a 0.3% forecast, and core CPI rose 0.3% against a 0.2% forecast, a third consecutive 0.3% print. The 2-year Treasury yield jumped 17 basis points to 4.74%, its biggest one-day move since April 2025. EUR/USD fell 0.53% to close at 1.1164.

Wednesday brought the Fed’s response. Governor Christopher Waller said a 50-basis-point hike should be considered in December if core inflation stayed elevated. Dallas Fed President Lorie Logan signaled readiness to tighten faster. The dollar index climbed 0.6% to 102.2. EUR/USD fell 0.66% to 1.1090, breaking below 1.1100 for the first time since spring 2025.

Thursday added an energy shock. President Trump said the U.S. does not need a deal with Iran, reversing hopes of a Middle East settlement and sending crude oil higher. Rising oil revived inflation risk on both sides of the Atlantic, but the market priced it as dollar-positive because it reinforced the case for more Fed tightening. The 10-year Treasury yield rose 11.6 basis points to 5.105%. The dollar index broke above its 102.83 pivot and pushed to a 19-month high above 103. EUR/USD fell to 1.1045 intraday and closed down 0.32% at 1.1054.

Friday’s data offered nothing to reverse the trend. Eurozone third-quarter GDP was confirmed at 0.4% quarter over quarter, employment was flat, and the September trade balance swung to a deficit. October U.S. PPI rose 0.3% against a 0.4% forecast, a softer print that should have helped the euro, but the annual rate climbed to 6.5%, the highest since November 2022. The pair drew little reaction from either release, hovering at 1.1048 shortly after the U.S. data and bottoming at 1.1043.

The sequence shows the asymmetry in this market. Euro-positive news, like hawkish ECB commentary and a Q3 GDP beat, produces short-lived bounces. Dollar-positive news, like hot U.S. inflation and hawkish Fed comments, produces sustained declines. Each rally since August has been sold, and each failure has pushed the pair to a lower low.

The Fed Is Winning the Hiking Race

The core of the EUR/USD trade is the gap between Federal Reserve and ECB rate expectations, and that gap has moved decisively in the dollar’s favor this week.

Futures markets price a quarter-point Fed hike at the December 8 and 9 meeting as the base case, with odds of a half-point move above 10%. On Wednesday, the pricing showed an 88.2% chance of a quarter-point hike and an 11.8% chance of a half-point move. By Friday, a hike of at least 25 basis points was fully priced. December Fed pricing sits at 28 basis points, which leaves room for further adjustment if the next inflation reports stay hot.

The Fed’s own officials have pushed that repricing. Waller said a 50-basis-point hike should be considered. Logan signaled readiness to raise rates higher and faster. San Francisco Fed President Mary Daly warned that AI spending is fueling inflation and that “inflation pressure is up, not down.” New York Fed President John Williams said inflation remains too elevated. Chicago Fed President Austan Goolsbee said Friday that “lately we’re not making any progress” on inflation.

The U.S. data supports the hawks. Core CPI has printed 0.3% three months running. Headline PPI is running at 6.5% year over year, and core PPI at 5.0%. Every major inflation gauge is moving in the wrong direction for a central bank trying to restore price stability.

The yield curve shows where the money is going. The 10-year Treasury yield reached 5.16% on Friday, its highest since October. The 2-year yield hit 4.867% on Thursday, its highest since October 14. Germany’s 10-year Bund yield sits at 3.24% to 3.30%. That puts the U.S.-German 10-year spread near 190 basis points, a gap that pulls global capital toward dollar assets and away from euro-denominated bonds.

The rate differential is the single most important number for the pair. When U.S. yields rise faster than European yields, the dollar strengthens against the euro, regardless of what the ECB does in absolute terms. This week, U.S. 2-year yields rose more than 30 basis points across Tuesday and Thursday alone. European short-term yields moved far less. The widening spread explains the 209-pip decline from Tuesday’s high.

The dollar’s technical setup adds momentum. The dollar index broke above its 102.83 pivot on Thursday, and a bullish flag breakout on the daily chart points to further gains. Resistance sits at 103.15, 103.23 and then 103.46. A close above 103.46 would extend the dollar’s move and push EUR/USD toward 1.1000.

For the euro to recover, the U.S. rate story has to cool. That means softer November inflation data, Fed officials pushing back on a half-point hike, or a decline in Treasury yields back below 5%. Without one of those, the Fed keeps winning the race.

The ECB’s December Hike: Priced, Signaled and Not Enough

The ECB is not standing still. It is tightening into a 4% inflation problem, and a December hike is all but certain. The issue for the euro is that the market has already priced it, and it does not match the Fed’s pace.

The ECB left rates unchanged at its October 29 meeting, keeping the main refinancing rate at 2.65% and the deposit facility rate at 2.50%. Those levels followed increases in June and September, the first hikes of a cycle that began after the start of the Iran conflict. At the post-meeting press conference, Christine Lagarde said policymakers had seriously debated raising rates but unanimously agreed to hold, and her message to markets was that the pause may last only until December.

Lagarde has kept that signal alive since. She said euro zone inflation will remain elevated over the coming quarters and that it would take “significant changes” to deter policymakers from raising rates again in December. A 25-basis-point hike would mark the third increase of the current cycle and take the deposit rate to 2.75%. The December meeting is scheduled for December 17.

The inflation data justifies the hawkish tilt. Euro area inflation rose to 4.0% in October, a three-year high, up from 3.8% in September and 3.2% in August. Energy drove most of the increase, with energy inflation reaching 18.8% in September. Core inflation held at 2.5% in October. Economists expect headline inflation to rise to 4.1% in November and 4.3% in December before peaking at 4.5% in January.

Money markets price at least two ECB increases by mid-2027. Bundesbank President Joachim Nagel and the head of the Bank of Italy have both flagged a December move. On paper, that is a hawkish central bank.

The problem is relative pace. The ECB’s deposit rate sits at 2.50% while U.S. policy rates are far higher, and the Fed is now debating a half-point move while the ECB debates a quarter-point move. The ECB is hiking into a weakening economy with a fragile sovereign bond market, and markets see less room for it to continue tightening. The Fed is hiking into an economy that has absorbed higher rates without breaking.

Lagarde’s own words cap the hawkishness. She said wage metrics have not triggered an alarming upward spiral and that secondary inflation pass-through has developed within the ECB’s expectations. That signals a central bank tightening for energy-driven inflation rather than for an overheating economy. For EUR/USD, the ECB’s December hike is a floor under the euro, not a catalyst for a rally.

Lagarde’s Early Exit and the Succession Overhang

The ECB faces a leadership transition at the worst possible moment, and that uncertainty is a quiet drag on the euro.

Christine Lagarde has confirmed she is leaving the ECB before her term ends in October 2027, saying she can no longer remain neutral. She will chair two more meetings, in December and February. After that, nobody yet knows who will take over. The former central bank governors of the Netherlands and Spain, Klaas Knot and Pablo Hernández de Cos, are seen as frontrunners.

The timing ties directly to French politics. An early exit would let EU leaders choose a successor before France’s spring presidential election, in which polls suggest the far right could win. That raises the stakes of the succession and links the ECB’s leadership to the euro area’s most acute fiscal risk.

Markets dislike uncertainty at a central bank, and this one comes with layers. The next president will inherit a tightening cycle driven by energy shocks, a French bond market under stress, and an inflation rate double the 2% target. The choice of successor will signal whether the ECB keeps tightening into weakness or pivots to protect growth and sovereign spreads.

A dovish successor would weaken the euro. A candidate seen as willing to tolerate higher inflation to support France’s bond market would narrow the ECB’s hiking path and widen the rate gap with the Fed. A hawkish successor would support the euro but raise the risk of a sovereign debt flare-up. Either way, the transition introduces a source of volatility that has no equivalent on the U.S. side.

The U.S. has its own policy uncertainty, but the Fed’s direction is clear. Every official speaking this week has leaned hawkish. The ECB’s direction is clear for December, but murky beyond February. Currency markets price forward, and the euro’s medium-term outlook depends on decisions that will be made by a president who has not yet been named.

The Financial Stability Review on November 18 and the account of the October meeting on November 26 are the next ECB communication events. Both will offer clues to how the governing council views the tension between inflation and financial stability. A Financial Stability Review that flags sovereign bond risk would signal caution on further hikes beyond December and weigh on the euro. Accounts that show broad support for a December move would offer modest support.

For the forecast, the succession adds a risk premium that keeps rallies shallow. Until the market knows who will lead the ECB from March, investors have less reason to build long euro positions based on the ECB’s hiking path.

France: The Euro’s Sovereign Risk Pressure Point

France is the fault line running under the euro, and the bond market has been testing it for weeks.

France’s 10-year government bond yield reached a 24-year high of 5.14% in late October, surpassing 5% for the first time since 2002. The spread between French and German 10-year yields peaked at 174 basis points on October 22. Those moves came amid fiscal stress, political uncertainty and a global bond selloff driven by stronger growth expectations, heavier debt issuance and massive investment linked to artificial intelligence.

The pressure has eased but not disappeared. The French 10-year yield fell to 4.66% on November 10, against a Bund at 3.24%, narrowing the spread by 10.5 basis points to 142.4 basis points. More recent readings put the French 10-year at 4.80%, 149 basis points above Germany. The Bund yield eased to 3.30% on Wednesday. Moody’s left France’s rating unchanged at Aa3 in late October, which helped stabilize the market.

The ECB has drawn a line on how far it will go to help. Nagel said the Transmission Protection Instrument, the ECB’s untested crisis tool for containing spread blowouts, “has 100% a monetary-policy background” and “is not a fiscal instrument, definitely not.” That stance tells markets the ECB will not bail out a government whose problems are fiscal rather than market-driven. It also means the euro carries tail risk that the ECB is reluctant to backstop.

The link to EUR/USD runs through capital flows and risk premium. A renewed spread blowout would hit Italian bonds, French bank equities and the euro simultaneously. Higher sovereign risk raises the cost of holding euro assets and pushes global investors toward safer dollar instruments. That makes French bond spreads a leading indicator for the euro.

ECB tightening makes the trade-off harder. Each hike raises financing costs for the most indebted sovereigns. The rise in German and French yields since the September meeting has already delivered the tightening equivalent of a 25-basis-point hike for Germany and 50 basis points for France, which argues that further hikes are less necessary. If the ECB hikes in December and spreads widen, the euro could weaken even as rates rise, because the market would price higher rates as defensive rather than growth-supportive.

The French economy is weak. GDP contracted 0.1% in the third quarter. Italy stagnated at 0.0%. Those are the two euro area economies most exposed to higher sovereign yields, and both are failing to grow.

For the forecast, the French spread is a swing factor. A spread back toward 174 basis points would push EUR/USD through 1.1000. A spread that narrows below 140 basis points would remove a layer of risk and support a recovery toward 1.1130.

Eurozone Data: Growth Beats, Jobs Stall and the Trade Surplus Disappears

Friday’s Eurozone data release offered a mixed picture that did nothing to change the euro’s direction.

Euro area GDP grew 0.4% in the third quarter, confirmed in Eurostat’s second estimate. That matched the preliminary reading and sits above the 0.2% consensus that preceded the flash release two weeks ago. Year-over-year growth edged up to 1.3% from 1.2%. The wider EU grew 0.5% on the quarter. The figures beat expectations, but growth slowed from 0.6% in the second quarter.

The country breakdown undercuts the headline. Ireland grew 5.5% on the quarter, driven by multinational-dominated industries in information, communication and manufacturing. Ireland’s GDP figures are notoriously volatile, and stripping out that contribution leaves the core economies in poor shape. Germany grew just 0.2%, down from 0.3%. Italy stagnated at 0.0% after a 0.2% gain. France contracted 0.1%. Spain eased to 0.6% from 0.7%. Three of the four largest euro area economies are either flat, shrinking or barely growing.

Employment confirmed the slowdown. Euro area employment was flat on the quarter, and the annual pace cooled, a sign that weaker demand is starting to reach the labor market. When growth slows and hiring stalls in the same quarter, the ECB faces a harder trade-off between fighting energy-driven inflation and protecting jobs.

The trade data was the weakest part of the release. The euro area recorded a trade-in-goods deficit of €10.3 billion with the rest of the world in September, a sharp swing from a €13.5 billion surplus in September 2025. Between January and September, the euro area ran a trade deficit of €36.5 billion, compared with a surplus of €102.2 billion over the same period in 2025. That is a €138.7 billion deterioration in nine months.

The trade swing matters for the currency directly. A trade surplus generates natural demand for euros as foreign buyers pay for European exports. A deficit reverses that flow. The energy shock explains most of the swing, as the euro area pays more for imported oil and gas. As long as energy prices stay elevated, the trade balance will remain a structural headwind for the euro.

The combined picture is stagflationary. Inflation runs at 4.0% while core economies stall, employment flatlines and the trade surplus has disappeared. That is the opposite of the environment that supports a strong currency. The ECB can raise rates to fight inflation, but higher rates in a stagnating economy do not attract capital the way higher rates in a growing economy do. The U.S. economy, by contrast, has absorbed higher rates while maintaining growth, which is why the dollar’s yield advantage is drawing capital away from the euro.

Energy and Iran: An Inflation Shock That Favors the Dollar

Energy prices are hitting the euro from two directions, and both point lower.

Crude oil spiked Thursday after President Trump said the U.S. does not need a deal with Iran. Brent traded at $96.21 per barrel on Friday, up 0.41%, and December WTI at $89.45, up 0.80%. Late in October, at the height of the U.S.-Iran conflict, WTI settled at $104.12 and Brent at $113.43. International inspectors said they are increasingly concerned over an undeclared enrichment plant at Isfahan, and Trump said he held off further strikes on Iran at the request of Gulf allies.

The euro area is more exposed to energy prices than the U.S. Energy carries a weight of 9% in the euro area consumer price basket. The region is a net importer of oil and gas, while the U.S. is a net exporter. Higher energy prices therefore act as a terms-of-trade shock for Europe, transferring income out of the euro area and worsening the trade balance. The swing from a €102.2 billion trade surplus to a €36.5 billion deficit over the first nine months of the year is the clearest evidence of that transfer.

The inflation channel works against the euro too. Higher energy prices push European inflation up, which forces the ECB to tighten. But tightening into an energy shock damages growth, which limits how far the ECB can go. In the U.S., higher energy prices also push inflation up, but the Fed is tightening into an economy that can absorb it. The same oil shock produces a hawkish Fed and a constrained ECB, which widens the rate gap in the dollar’s favor.

The supply data offers some hope for the euro. U.S. commercial crude inventories rose 4.7 million barrels to 414.4 million in the week ended November 6, against expectations for a 700,000-barrel draw. Global forecasts call for a supply surplus in the fourth quarter, the first since the U.S.-Iran war began. A decline in Brent toward $85 would ease euro area inflation, improve the trade balance and reduce the pressure on the ECB to tighten into weakness.

The geopolitical risk cuts the other way. A disruption to supply through the Strait of Hormuz would send oil sharply higher. That would hit the euro area harder than the U.S. on every channel: inflation, growth, trade balance and sovereign spreads.

For the forecast, oil is a direct input into EUR/USD. Brent above $100 points to 1.1000 and below. Brent back toward $85 would support a recovery toward 1.1130 and then 1.1260.

Technical Picture: 1.1044 Support, 1.1098 Pivot and 1.1260 Ceiling

The chart shows a well-defined downtrend testing its most important support level of the year.

EUR/USD has fallen for four consecutive sessions and is testing a key support level at 1.1044, the trigger level for the bearish scenario. Friday’s low at 1.1043 touched that level directly. A daily close below 1.1044 would confirm the break and extend the decline toward 1.1033, a Fibonacci extension level, and then the 1.1000 psychological mark.

The structure of the decline is bearish. Attempts to stabilize in October and early November failed to produce a sustained recovery, and renewed selling pressure has pushed the pair back to its lows for the year. The pair broke below the support line of a multi-month bearish channel in October. Daily studies show strong negative momentum and multiple moving average bear crosses, though the RSI has been oversold for an extended period, which warns that bears may face headwinds.

The support ladder below 1.1044 is clear. The first level is 1.1033. The second is 1.1000, the psychological round number. The third is the May 2025 monthly low at 1.0951. A break below 1.0951 would open a slide toward 1.0700. The bearish weekly range runs from 1.0950 to 1.1200.

Resistance stacks up quickly above the current price. The euro keeps a bearish lean while it stays below 1.1098, the first pivot. Buyers stepped in near 1.1056 on Friday, a Fibonacci extension level, but failed to push the pair above 1.1074. Above 1.1098, resistance sits at 1.1131, which aligns with the 50% retracement of the 1.0177 to 1.2082 uptrend and the 200-week moving average at 1.1130. That level is the most important long-term marker on the chart.

The upside target sits at 1.1260. That level captures the 1.1240 to 1.1260 resistance zone and sits just above Tuesday’s high at 1.1252. Above it, the forecast invalidation level for the bearish scenario sits at 1.1272, which aligns with the November 4 high at 1.1273. A move from 1.1051 to 1.1260 is a gain of 209 pips, or 1.9%.

The oversold condition argues for a bounce. Four straight down days and an extended RSI reading typically produce a relief rally, especially into a weekend with heavy short positioning. The question is whether that bounce can clear 1.1098 and 1.1131 or whether it fails below them.

The technical verdict: bearish below 1.1098, neutral between 1.1098 and 1.1131, constructive above 1.1131, with 1.1260 as the upside target and 1.1000 as the downside risk on a confirmed break of 1.1044.

Dollar Strength Beyond EUR/USD: The Broader FX Picture

The euro’s weakness is part of a broad dollar rally that is hitting every major currency, and that context shapes the forecast.

The U.S. Dollar Index touched 103.30 on Friday, its highest level in 19 months, and is on track for its biggest weekly gain since September. The index broke above its 102.83 pivot on Thursday after a bullish flag breakout on the daily chart. The dollar is drawing support from higher Treasury yields, expectations of further Fed tightening and Middle East uncertainty.

The yen has been hit hardest. USD/JPY trades at 160.10, a level that has Japanese officials issuing intervention warnings. Bulls have turned cautious near 160.00 on the risk of official action. A coordinated or unilateral yen intervention would weaken the dollar across the board, which would give EUR/USD an indirect lift.

Sterling has followed the euro lower. GBP/USD trades at 1.3238 after sliding into its 1.3220 to 1.3243 pivot zone, with support at 1.3200 and then 1.3169. The pound sits below both its main moving averages. EUR/GBP at 0.8361 shows the euro and sterling falling at similar rates against the dollar.

The Australian and New Zealand dollars are also under pressure, along with Asian currencies. Higher Treasury yields and expectations of further Fed tightening have drained demand from higher-beta currencies across the board.

The broad-based nature of the move cuts both ways for EUR/USD. On the downside, it means the euro has no independent support. The ECB’s December hike and the Q3 GDP beat are not enough to separate the euro from a dollar trend that is crushing every currency. On the upside, it means a turn in the dollar would lift the euro along with everything else. EUR/USD does not need a euro-specific catalyst to rally. It needs the dollar to peak.

The dollar’s rally has already priced a lot. A December Fed hike is fully priced, and the dollar index sits at a 19-month high. Positioning has moved firmly long dollars. December Fed pricing at 28 basis points still leaves room for further adjustment if the next U.S. inflation reports run hot, which supports the case for further dollar gains. If the data cools, the room for adjustment works in reverse.

U.S. equity weakness adds a wrinkle. The Nasdaq Composite fell 1.85% on Friday and the S&P 500 dropped 1.09%, led by a semiconductor rout after Nvidia’s chief executive resigned. Bitcoin fell below $70,000. Risk-off moves of that kind usually support the dollar as a funding and safe-haven currency, which adds to EUR/USD pressure in the short run.

Bull Case: The Path to 1.1260

The upside case for EUR/USD rests on four drivers, and none of them requires a change in the euro area’s fundamentals.

The first is a peak in Fed expectations. A December Fed hike is fully priced. If the Fed delivers a quarter-point move rather than a half-point and signals the cycle is near its end, the dollar would lose its main source of support. Friday’s softer monthly PPI print, at 0.3% against a 0.4% forecast, is one data point in that direction. A cooler November CPI would add a second.

The second is the ECB’s December hike. The ECB is set to raise its deposit rate to 2.75% on December 17, its third hike of the cycle. Lagarde has said it would take “significant changes” to stop that move. Euro area inflation at 4.0% and forecasts of 4.5% by January give the ECB cover to signal further tightening. A hawkish December statement paired with a dovish Fed would narrow the rate gap from both sides.

The third is oil. A decline in Brent from $96 toward $85 would ease euro area inflation, improve the trade balance and reduce pressure on French and Italian bond spreads. The U.S. inventory build of 4.7 million barrels and forecasts of a fourth-quarter supply surplus point in that direction.

The fourth is positioning. EUR/USD has fallen for four straight sessions and three straight weeks. The RSI has been oversold for an extended period. Short positioning is crowded, and the pair sits at a 19-month low on a test of major support. Oversold conditions at a key support level often produce sharp short-covering rallies.

The price path is defined. The first target is the 1.1098 pivot, where a close above would shift the bias from bearish to neutral. The second is 1.1131, the 50% retracement of the 1.0177 to 1.2082 uptrend and the 200-week moving average at 1.1130. Reclaiming that zone would repair the long-term trend structure. The primary upside target is 1.1260, the top of the 1.1240 to 1.1260 resistance zone and just above Tuesday’s 1.1252 high. A move from 1.1051 to 1.1260 is a gain of 209 pips, or 1.9%.

Above 1.1260, the forecast invalidation level for the bearish scenario sits at 1.1272. A daily close above 1.1272 would signal that the decline from the August 21 top at 1.1711 has ended and that a larger recovery is underway. That outcome requires a sustained shift in the rate story.

The bull case does not depend on Europe getting better. It depends on the dollar getting weaker. The ECB’s December hike, a cooling of U.S. data and a decline in oil are all plausible within the next five weeks.

Bear Case: 1.1044 Breaks and 1.1000 Gives Way

The bear case is the current trend extended, and it has more momentum behind it.

The first driver is a half-point Fed hike. The probability of a 50-basis-point December move has risen from zero a week ago. If November U.S. inflation data runs hot, the half-point hike becomes the base case and the dollar would extend its rally. December pricing at 28 basis points leaves room for further adjustment.

The second is U.S. yields. The 10-year Treasury yield at 5.16% sits 12 basis points below its October high of 5.28%. A break above 5.28% would widen the U.S.-German spread from its current level near 190 basis points and pull more capital into dollar assets.

The third is European stagnation. France contracted 0.1% in the third quarter, Italy stagnated, Germany grew 0.2% and euro area employment was flat. The trade balance swung to a €36.5 billion deficit over nine months. Economic sentiment fell for a second straight month to 96.9. An economy this weak limits how far the ECB can hike, which caps the euro’s rate support.

The fourth is French spreads. The French-German 10-year spread sits at 142 to 149 basis points after peaking at 174 basis points on October 22. A return to that peak would hit French and Italian bonds and push the euro lower. The ECB’s refusal to treat its crisis tool as a fiscal backstop leaves that tail risk unhedged.

The fifth is the ECB succession. With Lagarde chairing only two more meetings and no successor named, the euro carries a policy uncertainty premium that the dollar does not.

The price path is clear. A daily close below 1.1044 triggers the bearish setup. The first target is 1.1033. The second is the 1.1000 psychological level. A move from 1.1051 to 1.1000 is a decline of 51 pips, or 0.5%. Below that, the May 2025 monthly low at 1.0951 is the next major support, and the bearish weekly range extends to 1.0950. A break of 1.0951 would open a slide toward 1.0700, a decline of 351 pips from current levels.

The timeline is set. The FOMC minutes next week, the ECB’s Financial Stability Review on November 18, the account of the October meeting on November 26, the November inflation reports on both sides of the Atlantic, and then the Fed and ECB decisions on December 8 to 9 and December 17. Each event can move the pair by 50 to 100 pips.

Verdict: Bearish Below 1.1098, Upside Target 1.1260 on a Dollar Peak

EUR/USD enters the weekend at 1.1051 after touching a 19-month low of 1.1043, down 0.83% on the week, 0.88% on the month and 4.83% over 12 months. The pair has fallen for four straight sessions and three straight weeks, and it sits 8.4% below its 2026 high of 1.2067.

The near-term bias stays bearish while the pair trades below the 1.1098 pivot. The dollar index at a 19-month high of 103.30, a December Fed hike fully priced with a half-point move on the table, and a 10-year Treasury yield at 5.16% all argue against a quick recovery. The euro area economy is stagnating, the trade surplus has turned into a €36.5 billion deficit, French bond spreads remain elevated, and the ECB faces a leadership transition with no successor named.

The ECB is not the problem. It is hiking, and it will likely raise its deposit rate to 2.75% on December 17. The problem is that the Fed is hiking faster, into a stronger economy, with higher yields. The rate gap is widening in the dollar’s favor, and that gap is what drives this pair.

The levels are defined. On the downside, 1.1044 is the trigger, with 1.1033, 1.1000 and the May 2025 low at 1.0951 as targets. A break of 1.0951 opens 1.0700. On the upside, 1.1098 is the pivot, 1.1131 is the 200-week moving average and 50% retracement, and 1.1260 is the upside target, a 209-pip gain from current levels. The bearish scenario is invalidated above 1.1272.

The catalyst for the bull case is a peak in the dollar. A quarter-point Fed hike paired with signals that the cycle is near its end, a cooler November U.S. CPI, a 10-year yield back below 5%, and a decline in Brent toward $85 would open the path to 1.1260. The oversold RSI and four-day losing streak make a short-covering bounce likely, but a bounce is not a reversal until the pair clears 1.1131.

The verdict for traders: the trend is down and the dollar is in control. EUR/USD is bearish below 1.1098, neutral up to 1.1131, and targets 1.1260 once U.S. rates and the dollar peak. Until that turn, rallies toward 1.1100 are more likely to meet supply than to extend.

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