The EUR/USD pair slid to the 1.1750 area on Tuesday, falling one-fifth of one percent after several days of muted declines. Markets decline over the year-end holiday period, with lower trading volumes and a global shortage of market participants constraining real momentum.
Global markets are scheduled to close on Thursday for the transition into the new calendar year, leaving already constrained markets deeper into a holiday break during the second half of the final trading week of 2025. There is no meaningful economic data for this week.
The Fed wants to cut, but the timing remains complicated
Minutes from the Federal Reserve’s (Fed) latest meeting show that Federal Open Market Committee (FOMC) members are leaning cautiously toward the dovish side, with a majority of policymakers anticipating further interest rate cuts in the future; However, the pace of future interest rate cuts remains contingent on several factors, specifically that US inflation measures continue to decline.
Read more: Minutes from the FOMC meeting showed that most officials believe further interest rate cuts would be appropriate
The quality of US inflation data remains a concern for both investors and central bankers: despite the sharp slowdown in headline Consumer Price Index (CPI) inflation data in the latest edition, investors noted that the underlying data was missing several key components, and that the large body of data that was present included a high degree of assumptions and carry-over estimates due to large chunks of missing price information. Even if headline inflation numbers continue to decline, the lack of accurate measurement will keep FOMC votes and traders’ expectations on the back foot.
Technical forecast for the EUR/USD pair
On the daily chart, the EUR/USD pair is trading at 1.1752. The price is holding above the 50 EMA at 1.1675 and the 200 EMA at 1.1393, keeping the bullish bias intact. The 50 EMA rises and remains above the 200 EMA, consolidating trend support. The RSI at 60.22 remains bullish and below the overbought zone. Initial support lies at the 50 EMA, while the 200 EMA supports the broader advance.
Momentum cools at the margin as Stochastic pulls back to 77.61 after exiting the overbought zone, indicating a pause or shallow consolidation. A close below the 50 SMA at 1.1675 will open room for a deeper pullback towards the 200 SMA at 1.1393, while sustained trading above the rising average will keep the bullish scenario intact.
(Technical analysis of this story was written with the help of an artificial intelligence tool)
Daily chart of EUR/USD
Frequently asked questions about the euro
The euro is the official currency of the twenty European Union countries that belong to the eurozone. It is the second most traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily trading volume of more than $2.2 trillion per day. The EUR/USD is the most widely traded currency pair in the world, accounting for a 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the euro area. The European Central Bank sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – usually benefit the euro and vice versa. The ECB’s Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by the heads of the eurozone’s national banks and the six permanent members, including the President of the European Central Bank, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is one of the important economic indicators for the euro. If inflation rises beyond expected, especially if it is above the ECB’s 2% target, this forces the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to their counterparts usually benefit the euro, because they make the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can affect the euro. Indicators such as GDP, manufacturing and services PMIs, employment, and consumer confidence surveys can all influence the direction of the single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, it may encourage the European Central Bank to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro will likely fall. Economic data for the four largest Eurozone economies (Germany, France, Italy and Spain) are of particular interest, as they represent 75% of the Eurozone economy.
Another important data for the Euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly desirable exports, its currency will gain value from the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
