- EUR/USD forecast remains firm as dollar retreats to 4-month lows.
- Dovish Fed and stable ECB favor the EUR/USD long positions.
- Markets see no volatility amid the Thanksgiving holiday and in the absence of major releases.
The EUR/USD forecast edges higher as the price extends its recovery on Thursday, pushing above the key 1.1600 level as the US dollar slides to 4-month lows. Low liquidity amid Thanksgiving and rising odds of a December Fed cut keep the greenback under pressure, fueling a third consecutive daily gain for the EUR/USD.
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The Dollar Index (DXY) traded below 99.50 during the early European session, deepening a four-day retreat as the odds of a Fed rate cut jumped to 83%, as revealed by the CME FedWatch tool. Dovish commentary from Christopher Waller and Mary Daly, signaling concerns about the labor market, fueled expectations for a rate cut. This shift has pushed EUR/USD to the forefront after finding acceptance above the mid-1.1500 level earlier this week.
Macro themes have also helped the euro’s bid momentum. The US government shutdown has been resolved temporarily until January 30, keeping fiscal uncertainty alive. Political tension has also weighed on the situation as President Trump has reiterated that the successor to Fed Chair Powell is ready to take office. This will leave more dovish expectations from the Fed in 2026.
On the other hand, the European Central Bank remains in a state of pause. With 200 bps of easing already delivered this year and stabilized inflation, President Christine Lagarde has signaled the least likelihood of further cuts. Markets now expect a 97% chance of keeping the rates unchanged in the next meeting.
From yesterday’s data, the upbeat US Durable Goods data offered mild support for the dollar but not enough to trigger a trend reversal. With sentiment skewing dovish into the year-end and EUR/USD firming up, a sustained break above 1.1600 would shed off bearish pressure and aim for further gains by the end of 2025.
EUR/USD Key Events Ahead
Due to the US Thanksgiving holiday, market volumes are expected to be thin. Meanwhile, there is no high-impact data from the Eurozone as well.
EUR/USD Technical Forecast: 200-MA Supporting Upside
The 4-hour chart for the EUR/USD shows a mild correction to retest the 200-period MA at 1.1580 after breaking it. The RSI is also tilting down, revealing a short-term correction. However, the 20- and 50-MA crossover keeps the bullish momentum intact.
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On closing below the 1.1550, the bullishness could fade, leaving space for the sellers to test the 1.1500 level ahead of 1.1450. On the other hand, 1.1700 remains the key target for buyers.
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