EUR/USD Price Forecast: Buyers Eye $1.1786 Break After Fed Rate Cut Shift
During the European trading session, EUR/USD slipped slightly, trading just below $1.172 on Friday after pulling back...
Quick overview
- EUR/USD has slightly declined to just below $1.172 after reaching a two-month high of $1.1762.
- The US Dollar is under pressure due to expectations of further Fed rate cuts and a significant rise in jobless claims.
- The Euro is supported by the ECB's tighter policy outlook and recent German inflation data.
- Traders are awaiting comments from Fed officials that could influence the EUR/USD direction in the coming week.
During the European trading session, EUR/USD slipped slightly, trading just below $1.172 on Friday after pulling back from Thursday’s two-month high at $1.1762. Despite the mild retracement, the pair has gained nearly 2% over the past three weeks, supported by growing policy divergence between the European Central Bank (ECB) and the US Federal Reserve, as well as ongoing softness in the US Dollar.
Fed Rate Expectations Continue to Weigh on USD
This week’s Fed meeting delivered a rate cut and guidance for only one additional cut in 2026. Markets, however, continue to price in at least two more reductions, partly on expectations that Jerome Powell could be replaced by the more dovish Kevin Hassett. Hassett has consistently argued for lower borrowing costs, reinforcing downside pressure on the US Dollar.
Adding to that pressure, US Jobless Claims jumped by 44,000 in early December—the largest rise in more than four years—reaffirming the view that the Fed may need to ease further to stabilise the labour market.
Euro Supported by ECB Stance and German Inflation
The Euro continues to find support from the ECB’s comparatively tighter policy outlook. German inflation data showed HICP rising 2.6% YoY in November, although monthly prices dipped by 0.5%. These confirmed readings had little lasting effect on the Euro, but they reinforced the ECB’s argument for a slower path toward easing compared to the Fed.
Dollar Index Under Pressure Ahead of Fed Speeches
The US Dollar Index (DXY) has fallen to two-month lows near 98.00, reflecting broader market expectations for further Fed cuts. Other major central banks are nearing the end of their easing cycles, giving the Euro a relative advantage.
Traders will now monitor comments from several Fed officials—Anna Paulson, Beth Hammack, Austan Goolsbee, and Jeff Schmid—for additional clues on the policy path. Their remarks could shape EUR/USD direction going into next week.
EUR/USD Technical Analysis
EUR/USD is trading near $1.1730, softening after rejecting the $1.1763 Fibonacci 0.0 level, where repeated upper-wick rejections highlight seller presence. Price is retesting the 23.6% Fib at $1.1728, with deeper support at $1.1707 (38.2%) and $1.1689 (50%), both aligning with the rising intraday trendline.
The pair remains above the 50-EMA at $1.1664 and 100-EMA at $1.1635, keeping the broader structure bullish. The RSI near 65 shows firm momentum but signals cooling after the recent rally.
A break above $1.1763 would expose $1.1786 and $1.1811 as next resistance zones. If sellers push price below $1.1689, downside risks open toward $1.1672 and potentially $1.1646 if the trendline fails. As long as EUR/USD holds above the rising structure, dips into Fib support zones may continue to attract buyers.
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