EUR/USD Price Forecast - (EURUSD=X) Hits Six-Week High at 1.1660 as Weak U.S. Labor Data Fuels Fed Rate-Cut Momentum

EUR/USD Price Forecast - Euro Gains Momentum as Dollar Weakness Deepens

The EUR/USD pair advanced to 1.1660 after touching 1.1675, its highest since October 20, driven by a broad selloff in the U.S. Dollar (DXY 99.20, -0.33%). Market participants continue to price an almost certain 25-basis-point rate cut at the upcoming Federal Reserve meeting on December 10, while soft U.S. employment data reinforced bearish pressure on the Greenback. The ADP Employment Change report showed a 32,000 job decline, missing expectations for a 5,000 increase, adding to evidence of slowing private-sector momentum. The U.S. 10-year Treasury yield (US10Y) dropped to 4.06%, extending its multi-week downtrend, while traders anticipate further declines toward 3.90% should rate-cut bets intensify.

U.S. Economic Indicators Reinforce Dovish Fed Outlook

Despite a marginal uptick in ISM Services PMI to 52.6 (previous 52.4), underlying components show persistent weakness. The Employment Index contracted for a sixth straight month at 48.9, while New Orders fell to 52.9, down sharply from 56.2. The Prices Index eased to 65.4, signaling moderating inflationary pressures. Meanwhile, the S&P Global Services PMI dipped to 54.1 from 54.8, marking its lowest in five months. Combined with the weak ADP data, this reinforced market conviction that the Federal Open Market Committee (FOMC) will cut rates next week. The CME FedWatch Tool now assigns a 90% probability of a cut, up from 63% a month ago, anchoring EUR/USD’s bullish bias.

Eurozone Resilience Strengthens EUR/USD Fundamentals

Across Europe, macro indicators lend further support to the Euro. The Eurozone Composite PMI rose to 53.6, up from 53.1, while Germany’s Services PMI improved modestly to 53.4. Inflation figures confirmed stability, with headline CPI at 2.2% (vs. 2.1% prior) and core CPI unchanged at 2.4%, easing fears of renewed disinflation. This stability allows the European Central Bank (ECB) to maintain its restrictive stance, contrasting with the Fed’s dovish pivot. The German–Italy yield spread narrowed to 70 basis points, its lowest since 2010, underscoring improved sentiment across the Eurozone’s bond markets and reducing risk premiums on the single currency.

Political and Geopolitical Dynamics Favor the Euro

Recent geopolitical headlines also contributed to Euro resilience. Russia’s acknowledgment of “constructive” dialogue regarding U.S.-mediated peace proposals in Ukraine tempered safe-haven flows into the U.S. Dollar. Although no breakthrough is confirmed, the moderation of war rhetoric lifted regional confidence. Simultaneously, market speculation around the potential appointment of Kevin Hassett—a noted dove—as the next Federal Reserve Chair intensified expectations of prolonged monetary easing under the Trump administration, which further depressed the Dollar.

Technical Analysis: EUR/USD Eyes Resistance at 1.1728 and 1.1800

Technically, the EUR/USD structure remains strongly bullish. The pair trades firmly within an ascending channel, staying above its 50-day EMA (1.1606) and 200-day EMA (1.1583). The recent breakout above 1.1650 confirmed a shift in trend momentum, with the next resistance levels seen at 1.1728—the prior swing high—and 1.1800, a psychological threshold that could attract momentum buyers. RSI reads 68, reflecting overextended bullish conditions but with no immediate reversal signs. Immediate support now sits at 1.1600, followed by 1.1550, with deeper structural support near 1.1480–1.1500, aligning with the base of the November consolidation.

Market Positioning and Sentiment: Euro Bulls Dominate

Retail and institutional sentiment remains tilted in favor of the Euro. OANDA client data shows 74% net-long EUR/USD, while hedge fund positioning via the CFTC Commitment of Traders report indicates a 12,000-contract net increase in Euro longs last week. This marks the fourth consecutive week of speculative buying, suggesting confidence in sustained Euro appreciation. On the options side, implied volatility has dropped to 6.2%, its lowest since August, implying controlled bullish momentum rather than panic-driven short-covering.

Broader Dollar Pressure: DXY, USD/JPY, and GBP/USD Movements

The U.S. Dollar Index (DXY) remains under significant downward pressure, slipping to 99.20, its lowest level since November 14. The USD/JPY pair declined to 144.60, reflecting narrowing U.S.–Japan yield differentials, while GBP/USD climbed 0.72% to 1.3310. These moves underline a broad-based Dollar retreat, consistent with the Fed’s policy trajectory and fading inflationary threats. With the U.S. labor market cooling, the Dollar’s relative yield advantage continues to erode, cementing the Euro’s recovery trend.

Trading Strategy and Outlook for EUR/USD

Short-term traders are targeting 1.1728, while medium-term projections point toward 1.1830 if the Fed confirms its dovish path next week. However, overbought technical conditions may trigger brief corrections toward 1.1600 or 1.1575, offering potential re-entry points for long positions. As long as EUR/USD holds above its 200-day EMA, the bias remains firmly bullish. Institutional models from Deutsche Bank and ING now project an average 2026 EUR/USD rate of 1.21, reflecting structural weakness in the Dollar amid shifting global capital flows toward Eurozone bonds and equities.

Verdict: EUR/USD Bullish Bias Intact

Based on current fundamentals and market structure, EUR/USD (EURUSD=X) remains bullish. Sustained weakness in U.S. employment, steady Eurozone inflation, and narrowing bond spreads collectively favor the Euro. The next decisive breakout above 1.1728 would signal acceleration toward 1.1800 and potentially 1.1900 by early 2026. As long as the pair remains supported above 1.1550, the broader trend points upward. For now, the trade bias remains Buy, with medium-term strength favoring continued Euro dominance over the weakening Dollar.

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