EUR/USD December 2025: 1.17 Pullback Inside a 1.15–1.20 Bullish Range
Macro divergence keeps EUR/USD tilted higher even as France adds noise
EUR/USD has slipped back toward 1.1710–1.1740 after testing the 1.18 area, but the underlying macro structure is still EUR-positive. The ECB has frozen its key rate at 2.00% for a fourth meeting while raising its growth and 2026 inflation projections. Core Eurozone inflation is still around 3.1%, with services inflation pushing toward 4.2% and the ECB’s Q3 negotiated wage tracker pointing to rising pay pressures. That combination makes another hike or a very long hold at 2.00% more likely than near-term cuts, keeping Euro yields and rate expectations relatively firm.
On the US side, the Fed has already cut by 25 bps, taking policy into a 3.50%–3.75% range, and weekly jobless claims hovering around 245,000 confirm a cooling labor market. November CPI at 2.7% year-on-year and core at 2.6% came in sharply below expectations, reinforcing the idea that 2026 will bring more Fed easing rather than a new tightening cycle. The policy gap is clear: the ECB is holding a 2.00% rate with upside risk, while the Fed has pivoted and is being priced for further cuts. That is the backbone of the medium-term uptrend in EUR/USD.
French budget stress: why 1.1710–1.1730 in EUR/USD is political support, not a breakdown
The immediate catalyst for the latest dip in EUR/USD to around 1.1710 was France’s announcement that Parliament will miss the year-end budget deadline, forcing a rollover law to carry the 2025 budget into next year. With French debt-to-GDP still above roughly 112% and memories of the sovereign crisis not far from traders’ minds, any hint of fiscal dysfunction in a core Eurozone country hits the Euro first.
However, so far the reaction is controlled, not a disorderly repricing. Price has drifted into a support band that multiple desks are watching: 1.1710 from the VT Markets move, the 1.1715–1.1730 shelf highlighted by intraday analyses, and the broader 1.1650–1.1685 zone that lines up with the 21-day EMA, a rising trendline, and prior resistance now turned support. As long as EUR/USD holds above roughly 1.1650 on a closing basis, the French story is headline risk inside a bullish structure, not a regime shift.
Options markets reflect this: one-month implied volatility has ticked up to about 7.8%, enough to reward straddle buyers but far from crisis pricing. That fits a scenario of noisy, exaggerated moves in thin year-end liquidity rather than a trend collapse.
US dollar side: DXY stuck around 98.50 despite “better” data and sentiment bounce
The US Dollar Index is grinding around 98.50 with a three-day winning streak, but the quality of that bounce is mediocre. Michigan Consumer Sentiment has improved from 51.0 to 52.9, slightly below the 53.4 forecast, and weekly jobless claims are still close to 236,000 even after a 13,000 drop from the prior revised level. The move in DXY looks more like a position clean-up into year-end than the start of a new USD bull leg.
For EUR/USD, that translates into consolidation rather than a clear reversal. Short-term flows can keep the pair capped under 1.18 when DXY spikes on light data days, but the macro backdrop — softer US inflation, a Fed already in cutting mode, and no near-term ECB cuts — still argues that the next big 500-pip move is more likely higher than lower.
Event risk map for EUR/USD into year-end: what can actually move the pair
Data is thinning into the holidays, but what remains is important for timing entries. US Q3 GDP second estimate around 3.8% on December 23 could give the dollar a short-term bid if growth surprises to the upside, but with CPI at 2.7% the narrative is more “Goldilocks” than overheating. ADP weekly employment data around the same time will be watched for renewed softening that would reinforce 2026 cut expectations and support EUR/USD on dips.
FOMC minutes on December 30 are the key document. Markets will parse how broad the support was for the latest 25 bps cut and how open the Committee is to accelerating easing if inflation stays near 2.5%–2.7%. Anything that sounds more dovish than current pricing pushes EUR/USD toward the upper end of the range.
On the Euro side, the main point is the absence of cut expectations. There is no serious market pricing of an early-2026 ECB cut. Lagarde’s refusal to pre-commit on a path, combined with upgraded 2026 inflation, leaves the 2.00% deposit rate looking sticky. That is exactly what Euro bulls want: a central bank far from an easing cycle while the Fed is already in one.
Technical structure in EUR/USD: bullish trend, 1.1650–1.1685 as the line to defend
Price action confirms the macro story. EUR/USD has been printing higher highs and higher lows from the 1.15 region, riding rising moving averages. The first push hit the 1.1760–1.1800 band, an initial upside target that has now been tested and respected. The current pullback from just under 1.18 toward 1.1710 is standard profit-taking at old resistance, not a structural break.
On the downside, the support ladder is clear. The 1.1715–1.1730 band is the immediate intraday shelf; losing this opens room but does not by itself kill the trend. The 1.1650–1.1685 zone is the critical tactical buy area where the 21-day EMA, the short-term rising trendline and prior breakout levels converge. Below that, 1.1615–1.1630 is deeper support that medium-term players will watch if thin conditions drive a flush.
At the bottom of the structure sits 1.1500 around the 200-day moving average. A clean break there would invalidate the current bullish thesis. On the topside, 1.1750 is the first level to reclaim, 1.1800 is the psychological cap already tested, and a daily close above it would unlock more momentum. Beyond 1.18, resistance is relatively thin until the September 2025 high near 1.1920, with 1.2000 as the next macro target. With RSI sitting in a neutral band rather than overbought, EUR/USD has room to extend higher once this consolidation phase is finished.
Positioning, options and trade construction in EUR/USD: how to express a bullish bias
The current mix — French political risk, an ECB hawkish hold at 2.00%, a cutting Fed at 3.50%–3.75%, and a DXY bounce into 98.50 — creates an asymmetric profile for EUR/USD. The macro and technical signals say buy dips, but headline risk from Paris and year-end liquidity argue for controlled risk and smarter structure.
For directional traders, the clean expression is long EUR/USD on pullbacks into 1.1685–1.1710, with invalidation just below 1.1615 and a first profit zone around 1.1800. That setup risks roughly 70–90 pips to target 90–200 pips depending on whether the take-profit is set at 1.1800, 1.1920 or ultimately 1.2000.
For options traders, the volatility profile allows more nuance. Short-dated puts around or slightly below 1.17 can hedge Euro-long portfolios against a sudden widening in French spreads. Call spreads targeting 1.18–1.19 funded by selling distant 1.21–1.22 calls allow participation in the upside without overpaying for tail risk. For those who do not want to pick a direction on the French budget story, one-month at-the-money straddles around 1.17–1.18 can monetise a break out of the current compression, with implied volatility near 7.8% still reasonable relative to macro event risk over the next month.
Final verdict on EUR/USD: stance bullish, dips are for buying
Taking the key numbers together — EUR/USD trading around 1.1710–1.1740 after rejecting 1.18 on the first attempt, the ECB holding 2.00% with Eurozone inflation still above 3%, the Fed already cut to 3.50%–3.75% with CPI at 2.7% and jobless data softening, DXY stuck near 98.50, Germany PPI at –2.3% year-on-year, and a support stack starting at 1.1715 and running down to 1.1650 — the balance of probabilities favours the Euro.
The pair is in a bullish trend, undergoing a politically driven, year-end pullback inside a 1.15–1.20 range. That is a buy-the-dip, bullish EUR/USD setup, with controlled risk below 1.1615 and upside targets at 1.18 first, then 1.1920 and 1.20 if 2026 Fed-cut expectations strengthen further.
That's TradingNEWS
