The EUR/USD currency pair fell during the Asian session, trading around 1.1660-1.1655. This drop follows a peak not seen since October 17, as the US Dollar slightly recovered from its lows in late October. The USD’s rise has been limited due to expectations that the Federal Reserve may take a cautious stance. Recent US data suggests an economic slowdown and a weakening labor market, increasing the chances of a 25-basis-point rate cut at the next Federal Open Market Committee (FOMC) meeting. Meanwhile, the European Central Bank’s (ECB) decision to halt interest rate cuts supports the Euro.

Technical Analysis

Technically, EUR/USD’s breakthrough above the 100-day Simple Moving Average signals a positive trend. Attention now turns to upcoming US economic reports, such as Challenger Job Cuts and Weekly Initial Jobless Claims, which will precede crucial inflation data. The heat map shows percentage changes in major currencies, with the US Dollar gaining the most against the Japanese Yen. This allows users to see how currencies perform against each other, providing a clearer picture of market dynamics. There is a distinct divide between the anticipated actions of the Federal Reserve and the European Central Bank. This difference in policy is likely to influence the EUR/USD exchange rate in the coming weeks. Any drops toward the mid-1.1600s may present good opportunities for long positions. The case for a Fed rate cut next week is strengthening, as US inflation eased to 3.1% in November 2025. The labor market has also softened, with job openings falling to 8.7 million, the lowest in over two years. This has led markets to assign a high probability to a rate cut, with the CME’s FedWatch tool indicating chances above 60% for a 25-basis-point reduction.

ECB Policy Stance

On the other hand, the European Central Bank seems to be adopting a stable approach, providing support for the Euro. Eurozone inflation has greatly decreased, with the Harmonised Index of Consumer Prices (HICP) for November 2025 at just 2.4%. This supports the idea that the ECB has finished cutting rates for now and will wait for additional data before making any changes. For derivatives traders, a strategy of buying call options on the EUR/USD might be effective to benefit from the expected upward movement. Additionally, selling out-of-the-money put options could be a way to earn premiums, especially given the strong support above the 1.1600 mark. We expect implied volatility may rise leading up to next week’s FOMC meeting and Friday’s US inflation report. The outlook remains positive, as we recently saw a significant break above the 100-day Simple Moving Average, which may now provide dynamic support against any pullbacks. Traders should stay alert for US jobless claims figures today and the vital inflation data on Friday, as any surprises could lead to short-term price fluctuations. Create your live VT Markets account and start trading now.

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