The EUR/USD is currently trading at around 1.1765, experiencing slight losses in a calm market leading up to the New Year. The Euro faces challenges due to geopolitical tensions, which are holding back its growth, but it still finds support near recent highs around 1.1800. The US Dollar is at its weakest in nearly a decade. Differences in monetary policy are driving this trend. A nearly 14% increase in the EUR/USD pair is predicted for 2025, thanks to the contrasting approaches of the European Central Bank (ECB) and the US Federal Reserve (Fed), which is expected to cut rates next year.

Markets Await Fed’s December Minutes

Investors are looking forward to the Fed’s minutes from their December meeting. Recently, the Fed lowered interest rates and hinted at more cuts in 2026, especially with a new dovish chairman stepping in. Despite ongoing geopolitical issues in Ukraine and Taiwan, the impact on the USD has been minimal, while the Euro’s strength is limited. Technical analysis shows that the EUR/USD has support around 1.1760, within a wider bullish trend. However, the momentum for upward movement is restricted, as technical indicators suggest a bearish outlook. Key resistance levels to monitor include 1.1805 and 1.1820, with additional targets around 1.1863. The US Federal Reserve influences monetary policy by tweaking interest rates to maintain stable prices and full employment. They use quantitative easing (QE) and quantitative tightening (QT) to manage currency value by adjusting credit flow in the financial system. With the holidays in full swing, the EUR/USD pair is trading sideways near 1.1765. The main theme is the divide between a dovish Federal Reserve and a more cautious European Central Bank. Tonight’s release of the Fed’s December meeting minutes is the key event we’re anticipating for direction.

Outlook for a Higher EUR/USD

Several factors suggest that the EUR/USD may rise in the coming weeks, mainly due to the Fed’s clear plans to lower rates. Recent data shows US Core PCE inflation, which the Fed prefers, dropped to 2.4% in November 2025. Additionally, the latest jobs report indicated that unemployment rose to 4.1%. This data supports market expectations for multiple rate cuts in 2026, marking a sharp shift from the aggressive rate hikes witnessed in 2022 and 2023. Traders should remain cautious, however, as increasing global tensions could limit the Euro’s forward momentum. The uncertainty surrounding peace talks between Russia and Ukraine, along with Chinese military activity near Taiwan, could push investors towards safer assets. During such situations, the US Dollar typically gains strength, irrespective of the Fed’s rate plans. Considering these conflicting factors, strategies that benefit from increased volatility might be worth exploring. Currently, the pair is sitting between support at 1.1750 and resistance at 1.1805. A straddle or strangle strategy could be effective if the Fed minutes or any geopolitical news lead to a sharp movement in either direction. The thin holiday trading environment could amplify any sudden market shifts. Looking ahead, we’ll pay close attention to tonight’s Fed minutes for indications of any disagreements within the committee regarding the pace of easing in 2026. After the New Year, focus will quickly shift to the first US employment report of 2026, expected next week. This report will be crucial in determining whether the US economy is slowing enough to support the Fed’s anticipated rate cuts. Create your live VT Markets account and start trading now.

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