The euro has weakened significantly against the U.S. dollar, dropping below the key 1.1500 support level as financial markets reassess the likelihood of another interest rate cut by the U.S. Federal Reserve this year. The dollar's resurgence comes after newly released minutes from the Fed's October meeting revealed deep divisions among policymakers about the path forward for monetary policy.
On Wednesday, the EUR/USD pair experienced a sharp decline of 0.48%, falling to a low of 1.1517. The pair continued to trade near these lower levels on Thursday, November 20, signaling a potentially bearish close for the week as investor sentiment shifts.
Key Takeaways
- The EUR/USD currency pair has fallen below the critical 1.1500 support level, driven by a stronger U.S. dollar.
- Minutes from the Federal Reserve's October meeting show policymakers are sharply divided on a potential December interest rate cut.
- While the Fed is debating its next move, the European Central Bank is expected to hold interest rates steady until late 2026.
- Technical indicators suggest continued downward pressure on the euro, with traders watching upcoming U.S. jobs data for the next major catalyst.
Federal Reserve Divided on Future Rate Cuts
The primary driver behind the dollar's recent strength is a change in market expectations regarding the Federal Reserve's next move. Minutes from the central bank's October 28-29 meeting, released Wednesday, painted a picture of a committee in disagreement over the necessity of further monetary easing in December.
While the Fed did cut its benchmark rate to approximately 3.9% in October—its second reduction of the year—the path forward is now less certain. Several officials indicated it would be "likely to be appropriate" to keep interest rates unchanged for the remainder of 2025.
A Tale of Two Central Banks
The divergence in monetary policy between the U.S. and Europe is becoming more pronounced. While the Fed grapples with balancing a potentially slowing labor market against high inflation, the European Central Bank (ECB) faces a different economic landscape. With Eurozone inflation near its 2% target, stable growth, and record-low unemployment, the ECB is widely expected to keep its interest rates unchanged through the end of 2026. The bank held rates steady in October for the third consecutive meeting.
This contrast highlights the differing economic pressures on each side of the Atlantic. The Fed's indecision has introduced uncertainty, which typically benefits the U.S. dollar as a safe-haven currency.
Technical Outlook Remains Bearish for the Euro
From a technical standpoint, the euro's position appears precarious. The successful push by sellers to move the EUR/USD pair below the 1.1500 psychological level is a significant development that reinforces the bearish trend.
Technical indicators are providing further confirmation of this downward momentum.
- The 14-day Relative Strength Index (RSI) is trending lower, currently around the 40 mark. Continued selling could push the indicator into oversold territory.
- The MACD (Moving Average Convergence Divergence) indicator shows its lines leaning steadily downward, which supports the view that sellers are in control.
For a reversal of the current trend, analysts suggest the EUR/USD would need to mount a significant rally and move back towards the psychological resistance level of 1.1800. Until such a move occurs, the overall outlook is expected to remain bearish.
Traders are now identifying key levels to watch. Immediate support is seen around 1.1440, with a further floor at 1.1380. On the upside, resistance is pegged at 1.1590 and 1.1650.
Upcoming U.S. Jobs Data Looms Large
The market's attention is now firmly fixed on the next release of U.S. employment figures. This data is seen as a critical piece of the puzzle for Federal Reserve policymakers as they weigh their decision for the final meeting of the year on December 9-10.
The minutes revealed that "participants expressed sharply divergent views" on whether the central bank should implement another rate cut at its December meeting. The debate centers on whether weak employment or persistent inflation poses the greater threat to the U.S. economy.
A strong jobs report could further diminish expectations for a rate cut, potentially providing another boost to the U.S. dollar and applying more pressure on the EUR/USD pair. Conversely, a surprisingly weak report could reignite bets on monetary easing and reverse some of the dollar's recent gains.
The uncertainty is compounded by the economic effects of the longest government shutdown in U.S. history, which policymakers are still working to understand fully. For now, the path of least resistance for the euro appears to be downward until fresh economic data provides a clearer direction.
