Dollar Slips as Markets Price Near-Certain December Fed Cut; EUR/USD Coils Ahead of Key CPI, Jobs Data
The US dollar softened broadly as traders priced an increasingly likely Federal Reserve rate cut in December, leaving EUR/USD stuck in a tight range but edging toward a key resistance zone that could define the next leg.
Market Overview
The greenback extended losses after New York Fed President John Williams signaled openness to easing, while a Bloomberg report suggesting Kevin Hassett as a frontrunner for Fed Chair further stirred policy speculation. With futures now implying an ~87% probability of a December cut, attention is pivoting toward a sparse calendar before the next FOMC meeting, with markets hypersensitive to US jobless claims and ADP employment data that have yet to show convincing momentum.
In Europe, the European Central Bank’s stance remains steadfast: policy is seen as appropriate, and officials have stressed they will not overreact to small, short-term deviations from the 2% inflation target. Recent Eurozone data broadly validate that neutral posture, tempering volatility in the euro.
Risk appetite across global markets has been constructive, with softer US data nudging Treasury yields lower and pressuring the dollar. FX volatility remains contained, but options markets indicate rising interest in protection around upcoming US labor and inflation releases.
What Traders Are Watching
- Fed cut odds near 90% continue to weigh on the dollar; any upside surprise in US data could spark a brief squeeze.
- EUR/USD trapped in a roughly 150-pip range since October as macro signals cool and liquidity pockets favor mean reversion.
- Eurozone Flash CPI, US ADP, ISM Services PMI, and jobless claims headline the near-term catalyst slate.
- Technical focus: a key swing zone near 1.1669 and resistance toward 1.1728; support eyes the 1.15 handle.
- Positioning and year-end liquidity could amplify moves around NFP and CPI after the FOMC decision.
EUR/USD Technical Picture
Daily timeframe
EUR/USD has been rangebound in roughly a 150-pip band since October as the absence of fresh US macro catalysts constrained direction. Price action is grinding toward a pivotal swing area around 1.1669, where sellers may reassert with risk defined just above the zone, targeting a move back toward the 1.15 handle. A daily close above 1.1669 would embolden bulls for a push toward 1.1728.
4-hour timeframe
A rising trendline continues to underpin the bullish bias on intraday dips. Buyers have been defending that line to press for incremental highs, while bears are looking for a clean break lower to transition toward a trend-correction targeting the 1.15 area.
1-hour timeframe
Short-term flows are largely trendline-dependent. A sustained hold above intraday support favors continued grind higher into resistance, while a decisive break below the line would strengthen the case for downside continuation. Intraday range bands suggest constrained volatility until data provides a catalyst.
Macro Calendar
– Eurozone Flash CPI (today): Key for ECB trajectory and euro rates pricing.
– US ADP Employment, ISM Services (tomorrow): Services labor and demand signals for growth and inflation.
– US Initial Jobless Claims (Thursday): Incremental read on labor softness.
– University of Michigan Sentiment (Friday): Expectations for inflation and spending into year-end.
Market Context
With policy expectations dominating, the path of EUR/USD hinges on whether US data confirm a cooling economy consistent with a December cut. Weak prints would likely keep the dollar on the back foot and compress yields, supporting the euro. Conversely, a run of firmer numbers could spark a dollar bounce, though broader trend conviction may wait for the FOMC, followed by the NFP and CPI double-header. As BPayNews notes, liquidity conditions into year-end can exaggerate moves around these releases, raising the risk of false breaks.
FAQ
Why is the US dollar weakening right now?
The dollar is under pressure as markets price a high probability of a December Fed cut, while recent US data have been mixed to soft. Lower expected policy rates typically reduce yield support for the dollar, encouraging rotation into risk assets and other currencies.
What are the key EUR/USD levels traders are watching?
On the topside, the focus is on the 1.1669 swing zone and then 1.1728. On the downside, the 1.15 handle is a key support target if the trendline breaks and momentum turns lower.
Which upcoming data could move FX the most?
Eurozone Flash CPI can sway ECB expectations and euro rates. In the US, ADP, ISM Services, and weekly jobless claims shape near-term growth and labor narratives, but the biggest potential catalysts are the FOMC decision, followed by Nonfarm Payrolls and CPI.
How are bond yields influencing EUR/USD?
Softer US data have nudged Treasury yields lower, eroding the dollar’s advantage. If yields rebound on stronger data, EUR/USD could retrace lower; further yield compression would generally support the pair.
Is volatility likely to stay low?
Short-term volatility has been subdued due to data scarcity and clear policy expectations. However, event risk is rising; volatility typically increases around central bank decisions and major releases like NFP and CPI, especially in thinner year-end liquidity.
