EUR/USD struggles to extend its move higher, meeting some decent resistance around new two-month highs just past 1.1680 on Thursday.
Spot’s humble pullback follows an equally meagre advance in the US Dollar (USD), enough to prompt the US Dollar Index (DXY) to bounce off recent multi-week troughs near 98.70 in a context of a widespread rebound in US Treasury yields.
The Greenback keeps struggling for traction as traders stick with the view that the Federal Reserve (Fed) will cut rates again by 25 basis points at next week’s meeting. And with markets already leaning toward a more dovish path in early 2026, the buck doesn’t have much in the way of support right now.
Washington buys time, not peace
Sure, the US government is open again after a 43-day shutdown, but that relief is short-lived. Lawmakers only pushed the deadline to January 30, which means another shutdown threat is already on the calendar.
The politics flipped this time too. Democrats stood firm, saying the standoff highlighted soaring healthcare insurance costs for around 24 million Americans. Republicans countered that the shutdown caused needless damage, from delayed benefits to missed pay cheques, all while the national debt races toward $38 trillion and keeps growing by about $1.8 trillion a year.
Bottom line: Fiscal tensions are still simmering, far from solved.
Fed: A careful step, not a sprint
As widely expected, the Fed delivered a 25 basis point cut on October 29 and slightly restarted Treasury purchases to steady funding markets. The Fed Funds Target Range (FFTR) now sits at 3.75%–4.00% after a 10–2 vote.
Chair Jerome Powell tried to manage expectations right away: This was a cautious trim, not the beginning of a rapid easing cycle. The Committee is divided, and a December cut is absolutely not a done deal.
The Minutes backed that up; most policymakers were supportive of the move, but several warned against easing too quickly while inflation remains above the Fed’s 2.0% goal.
Markets, however, are still betting the Fed will press ahead: Odds of a cut next week sit above 85%, with nearly 85 basis points of easing priced through the end of 2026.
ECB: Comfortable on cruise control
Over in Europe, the European Central Bank (ECB) kept rates unchanged at 2.00% for a third meeting in a row on October 30. With inflation stabilising and growth hovering near projections, and after 200 basis points of cuts already this year, there’s simply no urgency to adjust policy.
President Christine Lagarde did acknowledge that global risks have calmed a bit, especially with softer US-China tensions, but uncertainty is still high.
The latest Accounts showed broad agreement inside the ECB: no further easing is needed just now.
Markets aren’t expecting much either: December 18 looks like another steady hold, with only tiny tweaks priced into 2026.
Tech corner
EUR/USD’s multi-day positive streak appears to have run into some resistance area near the 1.1700 yardstick for now.
If the pair manages to clear its December high of 1.1681 (December 4), it could then embark on a potential trip toward the weekly top at 1.1728 (October 17), ahead of the October ceiling at 1.1778 (October 1).
Alternatively, a move beneath the weekly low at 1.1491 (November 21) could pave the way for a challenge of the November base at 1.1468 (November 5), which appears somewhay reinforced by the key 200-day SMA at 1.1455. Further south comes the August floor at 1.1391 (August 1) prior to the weekly trough at 1.1210 (May 29) and the May bottom at 1.1064 (May 12).
Meanwhile, the pair’s positive outlook seems supported by near-term momentum indicators: The Relative Strength Index (RSI) eases slightly from the 62 mark, although it is still signalling that further gains look feasible. However, the Average Directional Index (ADX) near 14 suggests a still colourless trend.
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The big picture
EUR/USD continues to edge higher, just without a lot of excitement behind the move. Until the Fed sends a clearer message on easing or confidence in Eurozone growth improves, gains are likely to stay steady rather than spectacular. For now, the pair is mostly reacting to what’s happening on the US side of the equation.
