Key Moments
- After the Fed cut rates by 25 bps, Chair Powell struck a more dovish tone, which pressured the USD broadly.
- Meanwhile, the ECB is expected to hold rates steady while keeping a neutral stance, even as markets price a small chance of a hike next year.
- As a result, EURUSD has climbed above the 1.1728 swing level, with traders now watching 1.1778 as the next upside target.
Fundamental Overview
Dollar Softens After Fed Cut and Dovish Powell
The USD weakened across major currency pairs following last week’s FOMC decision. As expected, the Federal Reserve delivered a 25 bps rate cut and set a higher bar for further easing. However, Fed Chair Jerome Powell reinforced a dovish bias during the press conference.
Instead of maintaining a strictly neutral and data-driven tone, Powell downplayed inflation risks and emphasized lingering labor market softness. Consequently, markets interpreted the message as a greater willingness to tolerate higher inflation rather than rising unemployment.
Attention now turns to the upcoming US NFP and CPI releases. These reports will likely close out the final active trading week before holiday-thinned liquidity sets in. Currently, markets price in 57 bps of total easing by the end of 2026.
If US data surprises to the upside, especially in employment, traders may reprice Fed expectations more hawkishly and support the dollar. Conversely, weaker figures would likely extend USD losses as markets pull forward rate-cut expectations.
ECB Seen on Hold as Neutral Stance Persists
In contrast, euro traders expect the ECB to leave rates unchanged and avoid strong forward guidance. Policymakers continue to argue that the current stance remains appropriate and that short-term inflation deviations do not require a response.
Moreover, officials have stressed that the next move could go either direction, reinforcing their neutral posture. Recent economic data supports this view, and markets have started assigning a modest probability to a rate hike next year.
EURUSD Technical Setup
Daily Chart – Break Above Key Swing Level
On the daily chart, EURUSD has broken above the key 1.1728 swing level. This move opens room for a continuation toward 1.1778. From a risk perspective, buyers may prefer pullbacks toward the major trendline to improve positioning.
Meanwhile, sellers will likely wait for a clear break below support before targeting lower levels. Until then, upside momentum remains intact.
| Level | Role |
|---|---|
| 1.1778 | Next upside focus after the breakout |
| 1.1728 | Former resistance turned key support |
4-Hour Chart – Consolidation Above Support
On the 4-hour chart, EURUSD continues to consolidate just above 1.1728. As long as this level holds, buyers may attempt another push toward 1.1778.
However, a downside break below support could invite sellers and trigger a deeper pullback toward the major trendline.
1-Hour Chart – Range Trading Dominates
The 1-hour chart shows a tight range between 1.1728 support and resistance near 1.1750. For now, traders are fading moves inside this band while waiting for confirmation.
Event Risk and Catalysts
Looking ahead, volatility risks remain elevated around key data releases. Tomorrow brings Eurozone Flash PMIs and the US NFP report.
Then, on Thursday, attention shifts to the ECB rate decision and US CPI data. Together, these events could act as decisive catalysts for EURUSD’s next directional move.
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