EUR/USD Price Forecast - Euro to Dollar Extends Rally To 1.1630 As Fed Dovish Turn Lifts Euro

EUR/USD Price Forecast - Gains Momentum As Fed Easing Bets Intensify

The EUR/USD pair advanced for a sixth straight session, holding near 1.1630, its highest since mid-November. The rally stems from rising expectations that the Federal Reserve will deliver a 25-basis-point rate cut in December. The U.S. Dollar Index (DXY) slipped below 99.50, and Treasury yields retreated, with the 10-year yield falling to 4.02%. This dovish shift has weakened the greenback, giving the euro room to extend its recovery even amid subdued U.S. data. The upcoming ISM Manufacturing PMI, projected at 48.6 versus 48.7 in October, remains a key trigger. If it misses expectations, dollar selling could accelerate, pushing EUR/USD toward 1.1655-1.1670.

Eurozone Inflation Stability Supports Euro Strength

Eurozone consumer prices held steady, providing a solid foundation for the euro. The Harmonized Index of Consumer Prices (HICP) reached 2.2% year-over-year, with core inflation climbing to 2.5%. France’s CPI remained stable at 0.8%, while Spain’s inflation slipped to 3.1%, and Germany’s regional data stayed around 2.3%. Despite a contraction in the Manufacturing PMI to 49.6, retail sales rose 0.3% month-on-month, signaling a mild rebound in consumption. The European Central Bank (ECB) remains cautious but firm on holding rates steady. Policymakers are not signaling any urgent tightening, reflecting confidence in moderating inflation despite mixed data.

Technical Picture: EUR/USD Approaches Key Resistance Zone

Technically, EUR/USD broke above 1.1615 resistance and continues to hold above both its 50-EMA and 200-EMA. The Relative Strength Index (RSI) near 56 indicates moderate bullish momentum, while the MACD sits above the signal line, showing room for further gains. Key resistance levels stand at 1.1655, 1.1670, and 1.1730, while support lies at 1.1550 and 1.1500. Sustained price action above 1.1600 confirms short-term bullish bias, with scope to target 1.1720-1.1800.

Dollar Weakness Deepens Amid Dovish Fed Rhetoric

The U.S. Dollar continues to lose ground as investors reposition ahead of the Fed’s decision. Chair Jerome Powell’s silence during the pre-meeting blackout period has left markets relying on prior dovish signals from members such as John Williams and Austan Goolsbee, both of whom hinted at easing as early as December. The probability of a December rate cut has surged to 87%, with markets pricing at least two additional reductions in 2026. Falling yields and dovish expectations have weighed heavily on the DXY, keeping the euro well-supported across G10 pairs.

Euro Outperforms As DXY Tests Critical Support

The Dollar Index is testing a crucial ascending trendline near 99.35, where prior swing lows and the 50-EMA intersect. The RSI around 40 shows cooling but not exhausted momentum. A clean break below 99.00 would expose 98.56, opening deeper downside potential. Conversely, any rebound toward 99.82-100.38 would likely face selling pressure. The euro gained 0.29% versus USD, 0.24% versus GBP, and 0.31% versus NZD, showing clear strength. Risk aversion in equities and a Bitcoin drop below $90,000 further redirected flows into safer assets like the euro and yen.

Macro Outlook: Eurozone CPI And U.S. Data Drive Next Moves

This week’s focus remains on Eurozone Services PMI, Retail Sales, and updated inflation data, followed by U.S. ADP employment and PCE inflation releases. The 1.1600 options expiry with large open interest may anchor prices intraday. The ECB’s policy hold contrasts sharply with the Fed’s easing stance, giving the euro near-term advantage. However, strong U.S. labor or inflation surprises could revive dollar demand.

EUR/USD Forecast: Bullish Bias Above 1.1600, Eyes On 1.1720-1.1800 Range

Given current technicals and fundamentals, EUR/USD maintains a bullish stance while trading above 1.1600. Targets are set at 1.1720, with potential to reach 1.1820 if rate-cut expectations solidify. A drop below 1.1550 would shift momentum toward 1.1470, invalidating short-term bullish structure. Overall, the euro remains positioned to outperform as long as U.S. policy softens and Eurozone inflation holds firm. Verdict: BUY EUR/USD, with near-term momentum supported by declining yields and fading dollar strength.

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