EUR/USD Price Forecast: Euro at 1.1660, Fed Cut Odds Near 90% and Hawkish ECB Boost Momentum Toward 1.1820

EUR/USD Price Forecast: Euro Holds Above 1.1660 As Fed Cut Bets Clash With Hawkish ECB And Rising German Momentum

EUR/USD Stabilizes At 1.1665 As Traders Position For The Fed’s Final Move Of 2025

EUR/USD trades near 1.1665, maintaining firm support above its recent breakout range after rebounding from 1.1525, which previously marked a critical Fibonacci zone. The pair remains stable as markets brace for a decisive Federal Reserve policy meeting expected to define direction into year-end. Traders are positioned for a 25-basis-point rate cut, with the CME FedWatch Tool assigning an 88% probability, sharply higher than the 70% priced last week. This shift has weighed on the U.S. Dollar Index (DXY), now down to 99.0 from 101.4, sustaining weakness across major currency pairs. Meanwhile, the euro’s strength is amplified by improving German macro data and hawkish signals from the European Central Bank (ECB), producing a sharp divergence between both monetary paths.

Fed Easing Cycle And Eurozone Resilience Build Divergence

U.S. data continues to display a mixed yet decelerating trend. The core PCE price index rose 0.2% month-on-month, in line with expectations, keeping inflation anchored near 2.8%. The 10-year Treasury yield has eased to 3.81%, down from 4.45% in early November, as markets anticipate the start of a monetary easing cycle. The narrowing of real yield differentials, which now stand near their smallest since April, continues to favor the euro over the dollar. In contrast, Germany’s industrial output unexpectedly jumped 1.8% month-on-month in October, against expectations for a 0.4% contraction, following a 1.3% gain in September. The strength in German data challenges the Eurozone slowdown narrative and underpins optimism for the bloc’s recovery. ECB official Isabel Schnabel reinforced this divergence, stating that she was “comfortable” with the idea of a potential rate hike in 2026, citing structural resilience across the Eurozone. With the ECB leaning hawkish while the Fed prepares to cut, EUR/USD is positioned advantageously above 1.1650, with a potential technical extension toward 1.1750–1.1820.

Dollar Weakness Persists As Traders Rotate Toward Euro Assets

The dollar’s weakness reflects a clear reallocation of capital toward currencies with stronger forward policy guidance. The U.S. fiscal deficit remains above $2.1 trillion, and short-term Treasury yields around 4.02% signal that real yields are compressing. The two-year U.S.–Germany spread, which has narrowed to less than 110 basis points, is at its lowest since May and historically supports euro appreciation. Every 10-basis-point narrowing between these yields typically adds 0.0025–0.0030 to EUR/USD, suggesting upside potential toward 1.1750 in coming sessions.

Technical Recovery Confirms Structure Shift After Two-Month Sideways Trend

Price action on the EUR/USD chart confirms that momentum has transitioned from consolidation to accumulation. The pair’s breakout above 1.1525, the 0.382 Fibonacci retracement, signaled a structural shift in direction. Buyers have maintained control since reclaiming 1.1653, the 0.618 retracement, while each retest of that zone has absorbed selling pressure effectively. Indicators confirm stability: the Parabolic SAR remains positive, the Supertrend holds a buy bias with trailing support at 1.1504, and RSI readings at 61 show steady bullish energy without overextension. The next resistance stands at 1.1728, overlapping the 0.786 Fibonacci level, followed by 1.1822, which aligns with summer highs. On the downside, immediate support remains 1.1550, followed by a secondary defense line at 1.1525, both serving as consolidation anchors.

Ecb Hawkishness Counters Fed Dovish Messaging

While the Fed moves toward easing, the ECB continues to emphasize inflation stability and caution against premature rate cuts. Eurozone inflation hovers near 3.0%, a level the ECB still deems elevated. The combination of positive real wage growth, firm energy prices, and improved German output gives the central bank reason to maintain restrictive policy longer. Each 25-basis-point divergence in policy direction between the Fed and ECB typically translates to a 2–3% appreciation in EUR/USD over a month-long horizon. Should the Fed confirm easing while the ECB holds rates steady, the pair could extend gains toward the 1.18 region within the first quarter of 2026.

Market Positioning And Yield Flows Support Sustained Euro Strength

CFTC data show speculative net long positions in the euro increasing 11% week-on-week, while dollar longs have fallen 8%, marking the steepest shift since early 2025. European equity inflows have also risen for three consecutive weeks, with the Euro Stoxx 50 gaining 2.7% as capital rotates out of U.S. assets. Cross-asset correlations highlight that EUR/USD is now moving in sync with risk assets, signaling investor confidence in European growth and stability. The euro’s outperformance against commodity-linked currencies—AUD, CAD, and NZD—further underscores the structural bid coming from institutional rebalancing.

Fomc Decision To Trigger Volatility Breakout

The FOMC decision on Wednesday is expected to dictate the next directional impulse for EUR/USD. A dovish 25-basis-point cut paired with language confirming the start of a sustained easing cycle could propel the pair toward 1.1750–1.1820, while a hawkish tone could cap gains and push a temporary correction back to 1.1550. The ADP employment report, JOLTs job openings, and weekly jobless claims will add fuel to volatility, especially if they highlight labor softening consistent with an early easing phase. Implied weekly volatility now stands at 7.9%, its highest since September, suggesting post-Fed moves of over 150 pips are likely.

Technical Bias Points To Continuation Above 1.1680 Toward 1.1820

The EUR/USD setup remains bullish as long as it holds above the 20-day EMA (1.1635) and the 200-day EMA (1.1575). The pair’s intraday structure shows persistent higher lows since mid-November, confirming the underlying accumulation pattern. Momentum oscillators remain favorable, with the MACD histogram flattening around zero, hinting at latent upside power. A confirmed daily close above 1.1680 would unlock the next leg higher, targeting 1.1728 initially and then 1.1820. Only a close below 1.1525 would invalidate the bullish sequence.

Macro Risks Remain, But Euro Bias Dominates

Macro conditions favor continued euro strength unless the Fed delivers a hawkish surprise. The U.S. deficit trajectory, combined with slowing labor momentum, undercuts the dollar’s long-term attractiveness. In Europe, ongoing improvements in industrial production and export performance reinforce the view that the bloc’s economy is stabilizing. The Eurozone 10-year bund yield has risen to 2.38%, widening the nominal spread advantage against the U.S. and offering further support to the currency.

Market Sentiment Shows Controlled Accumulation Phase

Market psychology has turned decisively bullish on EUR/USD. Dips toward 1.1600 are now perceived as buying opportunities rather than signs of exhaustion. The absence of large-volume rejection candles confirms accumulation from institutional desks, while retail positioning remains cautious—an ideal backdrop for continued upward pressure. Volatility compression, declining dollar-hedging premiums, and firm open interest all indicate that the market is transitioning into a medium-term euro uptrend phase rather than a short-term correction.

Verdict — EUR/USD: BUY (Target 1.1820, Support 1.1550)

At current levels near 1.1665, EUR/USD retains a bullish bias supported by Fed-ECB policy divergence, firm German data, and positive momentum across European assets. The pair targets 1.1750–1.1820 in the near term, with solid support between 1.1550–1.1525. Unless the Fed delivers a hawkish tone that shifts real yield spreads back in the dollar’s favor, the euro is expected to remain dominant into the end of Q4 2025.
Rating: BUY — momentum constructive, technical structure aligned, and macro divergence sustaining upside bias.

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