The EUR/USD pair is exhibiting robust technical and fundamental tailwinds, trading at 1.1645 on December 6, 2025—up 0.8% monthly and 10.2% yearly—poised for further gains toward the 1.1700 psychological barrier. This surge is anchored in the U.S. Dollar’s (USD) unrelenting weakness, fueled by the Federal Reserve’s (Fed) dovish stance. Markets now price in an 87% chance of a 25-basis-point cut at the December 9-10 FOMC meeting, lowering the fed funds rate to 3.50%-3.75% from 3.75%-4.00%, per CME FedWatch. This follows October’s cut and signals two more in 2026, amid cooling U.S. labor data (November ADP jobs beat but ISM Services PMI expected to dip) and sticky 3% inflation. Chair Jerome Powell’s rhetoric emphasizes job market support over inflation risks, with BofA forecasting a terminal rate of 3.00%-3.25% by mid-2026. Dissent within the FOMC—some pushing for a hold or 50bps cut—highlights division, but dovish signals from NY Fed’s John Williams tip the scales.
Bolstering the euro, the Eurozone’s economy is stabilizing with clear recovery signs in services, offsetting manufacturing drags. November’s HCOB Services PMI surged to 53.6 (from 53.0), a 30-month high and sixth straight expansion, beating forecasts of 52.8, driven by robust new orders and hiring. The Composite PMI hit 52.8, fastest growth since May 2023, while inflation eased to 2.2% (above ECB’s 2% target but contained). ECB’s Christine Lagarde noted on December 5 that rate holds through 2026 are likely, narrowing U.S.-Eurozone differentials and curbing EUR borrowing costs. German Services PMI rose to 53.1, French to 51.4, and Italian Composite to 53.8, signaling broad resilience despite Germany’s Composite dip to 52.1. Retail sales held flat MoM but +1.5% YoY, with Ireland’s Q3 GDP up 15.8% YTD on pharma exports.
Technically, EUR/USD‘s decisive breach above 1.1600 has flipped it to support, forming a bullish channel above the 200-day SMA at 1.1550. RSI (14) at 62 signals bullish momentum without overbought risks, and a head-and-shoulders bottom eyes 1.1727 if 1.1655 breaks. Key supports: 1.1620 (20-SMA), 1.1555; resistances: 1.1670, 1.1700 (October high). Option expiries at 1.1650 ($2.1bn) may pin prices Friday. Forecasts vary: FXStreet sees parity risks long-term but 1.17 short-term; Trading Economics targets 1.19 in 12 months; LiteFinance eyes 1.164-1.172 December range.
X sentiment echoes optimism: Traders like @EALX_trading highlight “clean structure” for upside, while @QFXData notes 75% longer-term bullish bias despite near-term dips. MUFG predicts euro strengthening over 6-12 months. With U.S. PCE Friday and Fed rhetoric pivotal, bulls dominate; a close above 1.1650 accelerates to 1.1700, reshaping 2026 amid ECB stability and U.S. slowdown fears.
