EUR/USD struggled to build on its weekly rebound on Thursday, with global markets largely drifting into consolidation mode as US trading thinned out for the Thanksgiving holiday.
Furthermore, the pair’s choppy price action mirrors the uncertain tone in the US Dollar (USD), even as expectations for additional Federal Reserve (Fed) rate cuts continue to underpin the broader backdrop.
That said, the US Dollar Index (DXY) is stuck near multi-day lows around 99.60, swinging between small gains and losses after several days of declines, including a break below its 200-day SMA at 99.74.
Shutdown off… but the clock’s already ticking
Washington may have reopened after a 43-day government shutdown, but no one’s pretending this is a permanent fix. Lawmakers simply agreed to keep the government funded until January 30, which means another political standoff is already pencilled in.
What’s different this time is who drew the line. Budget fights usually feature Republicans demanding tighter spending, but Democrats were the ones holding firm, arguing the pause was needed to highlight rising healthcare insurance costs hitting 24 million Americans. Republicans countered that the stunt caused needless disruption, with delayed benefits, unpaid federal workers, and stalled services, while the national debt keeps climbing toward $38 trillion, rising around $1.8 trillion every year. Not exactly a sustainable backdrop.
Diplomacy gets a flicker of hope
There’s also a bit of movement on the geopolitical front. Ukraine’s President Volodymyr Zelenskiy indicated he’s ready to work with a US-backed plan to move peace talks with Russia forward, and said he’s open to speaking directly with President Trump to resolve sticking points. He stressed key European players should also be involved.
Trump, speaking separately, suggested a deal is “getting close”, though without details.
There’s even talk that Zelenskiy may travel to the US soon to push discussions along, but Washington hasn’t confirmed anything. Optimism is rising, but quietly: Russia continues to insist it won’t sign any agreement that doesn’t meet its objectives.
Fed: Not ready to jump into easing mode
The Federal Reserve delivered exactly what markets expected on October 29, a 25 basis point cut and a gentle restart of Treasury purchases to keep money markets running smoothly.
The vote came in at 10–2, bringing the Fed Funds Target Range (FFTR) to 3.75%–4.00%. The message was clear: this is insurance, not the start of a big cutting cycle.
Chair Jerome Powell reminded markets that opinions within the FOMC are still very split, and a December cut is not a done deal.
The Minutes reinforced that caution. Most policymakers saw a cut as appropriate, but others warned that easing too quickly could slow the path back to 2% inflation.
Even so, markets remain dovish-leaning, pricing a 79% odds of another cut on December 10, and around 86 basis points of easing by end-2026.
ECB: Happy to sit still for now
Across the pond, the European Central Bank (ECB) kept rates parked at 2.00% for a third straight meeting. With inflation and growth both near target, and the ECB having already delivered 200 basis points of cuts this year, policymakers see little urgency to tweak policy again.
President Christine Lagarde acknowledged that global risks have calmed a touch, thanks in part to the US–China trade thaw. But uncertainty remains elevated, and officials are reluctant to move prematurely.
Meeting Accounts released Thursday showed policymakers believe no further easing may be needed, and they’re certainly not rushing into rate cuts.
Markets agree: Pricing implies a nearly 98% probability of unchanged policy next month, with only minor easing expected through 2026.
Tech corner
EUR/USD’s rebound is holding up well so far this week, with the pair looking increasingly ready to clear the 1.1600 mark before long.
If buyers stay in control, the next upside level to watch is the November high at 1.1656 (November 13), which is supported by both the 55-day and 100-day SMAs. Beyond that emerge the weekly peaks at 1.1668 (October 28) and 1.1728 (October 17), before the October top at 1.1778 (October 1).
On the downside, a move back under the November base at 1.1468 (November 5) could shift attention towards the critical 200-day SMA at 1.1426, followed by the August floor at 1.1391 (August 1). A deeper retreat would expose the weekly low at 1.1210 (May 29) and then the May valley at 1.1064 (May 12).
For now, the pair’s broad tone remains constructive. Indeed, the Relative Strength Index (RSI) has nudged up past 52, signalling building momentum, although the Average Directional Index (ADX) near 12 still suggests the broader trend is not particularly strong just yet.
Bottom line
EUR/USD has been drifting lower since peaking above 1.1900 in September, and the Eurozone still isn’t offering much to change the narrative. Until the Fed sounds more committed to easing, global sentiment improves, or investors find renewed love for European assets, the Euro (EUR) is likely to keep taking its cues from the US Dollar.
