EUR/USD falls to a one-week low as the US Dollar strengthens. Expectations rise for the Federal Reserve’s rate decision, with many anticipating another rate cut. The pair faces strong resistance at 1.1650, supported by the 21-day and 50-day SMAs, which could cushion further declines. Even though the Euro has a generally positive outlook, the Greenback’s recovery pushed EUR/USD down to around 1.1623. The US Dollar Index is near 99.20 after previously hitting 98.79.

The Role Of Central Banks

The potential interest rate cut from the Federal Reserve contrasts with the European Central Bank maintaining its rates, impacting short-term flows that favor the Dollar. The double-bottom pattern and the struggle at the intersection of the 100-day SMA and the 1.1650 level remain technical highlights. If EUR/USD breaks above 1.1650, it could move toward 1.1700 and 1.1750. However, if it drops below the SMAs, it may fall back to 1.1500. Momentum signals, like a positive MACD histogram and an RSI at 54, show a neutral to cautious bias. For stronger bullish momentum, the RSI needs to rise towards 60. The Euro decreased by 0.18% against the US Dollar but performed best against the Swiss Franc, as shown in the heat map of major currencies. Reflecting on the market, it’s intriguing to note the stall below 1.1650, especially since today is December 8th, 2025. With EUR/USD trading at 1.0750 this morning, the dynamics have dramatically changed over the past couple of years. The earlier focus on a potential Federal Reserve rate cut starkly contrasts with the tightening cycle we’ve experienced.

Past And Present Market Dynamics

The divergence between the central banks is again the key theme, but roles have shifted. We now expect the Fed to start an easing cycle in 2026, following data showing Q3 GDP growth slowed to an annualized 1.5%. Meanwhile, the European Central Bank remains cautious, with November’s Eurozone inflation figures at an uncomfortable 2.8%. This situation suggests that while the dollar’s long-term trend may be downward, the path will be volatile. The Dollar Index (DXY), which was around 99.20 back then, has maintained a strong position above 106.50 for most of this year. This indicates that the market has accounted for a significant interest rate advantage for the US over an extended period. For derivative traders, implied volatility on EUR/USD options is likely to increase as we head into the new year. Strategies that capitalize on range-bound conditions with a slight bearish bias on the pair could be advantageous in the coming weeks. We see this as an opportunity to sell out-of-the-money call options expiring in January to collect premiums, taking advantage of year-end consolidation. The technical outlook from that time—supported by the 21 and 50-day moving averages—serves as a reminder of a less bearish market. Currently, those same moving averages slope sharply downward, acting as resistance to any slight rallies. Any strength in the euro towards the 1.0800 level will likely be viewed as a selling opportunity before the year’s end. Create your live VT Markets account and start trading now.

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