EUR/USD Jumps Past 1.18 as 4.3% US GDP Fails to Rescue the Dollar
The euro kept pushing higher in European trading, rising above the 1.18 handle on EUR/USD. At the same time, the US dollar remained...
Quick overview
- The euro has risen above the 1.18 level against the US dollar, which is under pressure due to market conditions and expectations of future policy changes.
- Traders are increasingly confident that the Federal Reserve's tightening cycle is over, leading to bets on rate cuts in 2026.
- Despite a strong US economic growth rate of 4.3% in Q3, the dollar's recovery was short-lived, as consumer confidence has declined.
- The technical outlook for EUR/USD remains positive, with key support levels holding and momentum indicators showing healthy trends.
The euro kept pushing higher in European trading, rising above the 1.18 handle on EUR/USD. At the same time, the US dollar remained under quite a bit of pressure – and that’s been the case all week due to the holiday-shortened week and a thinning of market liquidity. This week has seen currency markets less driven by short-term data surprises and more by what traders expect from policy going forward.
The greenback’s struggles are a reflection of growing confidence that the Federal Reserve’s tightening cycle is finally over – and that’s given traders the confidence to start betting on rate cuts in 2026. All of this is making the dollar look defensive and allowing the euro to hold its ground even in the quieter-than-usual trading conditions.
Fed Rate Cuts Keep Dollar on the Back Foot
US data hasn’t done much to reverse the dollar’s slide of late. The latest numbers showed the US economy expanded at a 4.3% annualized pace in the third quarter, beating expectations and accelerating slightly from the previous quarter.
Yet even with that, it only gave the dollar a brief boost.
Analysts noticed that a big chunk of that growth came from areas like healthcare spending and inventory adjustments – but it didn’t have much to do with a general pick-up in private investment or productivity.
Consumer confidence took a hit in December – and while the labor market is still chugging along, it’s doing so at a slower pace. The market is now in agreement that the Fed will keep rates steady in January – and then deliver two rate cuts later in 2026, which is the view you see in futures markets and Fed-sensitive assets.
EUR/USD Looks Happy to Keep on Rising
From a technical standpoint, EUR/USD is looking good. The pair is consolidating below recent highs and is still holding within a clearly defined rising channel, which is a good sign that the trend remains intact rather than running out of steam. Some of the key technical features that are still supporting the setup include:
- Price is holding its ground above key moving averages like the 50-day, near 1.1760, and the 100-day, around 1.1740
- We’re seeing pretty shallow Fibonacci retracements, with buyers coming in to defend those pullbacks
- RSI is hanging around 58, so we’ve still got a lot of healthy momentum without prices getting too overbought.
In the short term, there’s still resistance at 1.1808, while support is layered at 1.1760 and 1.1727, which align with the channel support.
Outlook: We’re Waiting For Policy Signals
As we move forward, the direction of EUR/USD will hinge on US labor data and the Fed’s outlook. Any change in views on rate-cut expectations could quickly shift dollar sentiment – but for now, the balance of risks is definitely on the euro’s side as long as policy divergence remains the main focus.
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