EURUSD: A December rate cut is far from guaranteed
Shortly after the close of U.S. markets—when Nvidia’s results once again poured fuel on the fire of the AI-trade—the FOMC released the minutes of its October meeting. These revealed a clear split among the 12 voting members regarding the possibility of another cut to the policy rate (currently in the 3.75%–4.00% range) in December, a move the market had considered likely only a few months ago.
On one side, the doves—led by the new member Stephen Miran, strongly “recommended” by President Trump—would like to further ease monetary policy, citing concerns about a clearly softening labor market and elevated mortgage rates that continue to restrain the housing sector. On the other side, “many” members remain focused on inflation, which is still well above the official target, and argue that no additional cuts should be expected in 2025. One might also note—though this is a personal comment—that justifying a rate cut with equity markets near all-time highs and speculative-bubble fears in the air seems contradictory.
In any case, Fed funds futures now price only a modest 30% probability of a December cut and are essentially split (50-50) regarding January.
If we combine this with yesterday’s U.S. balance-of-payments data—which showed further improvement and a clear strengthening trend since tariff discussions began back in April—it becomes easier to understand why the USD has stopped weakening over the past two months, even against the euro.
Technical Analysis
EURUSD reached a relative high of 1.1918 on 17 September and settled yesterday at 1.1537. Above, we reviewed several of the fundamental drivers supporting the dollar. On the euro side, recall that the rise in the 10-year Bund yield seen in late 2024/early 2025—driven by announcements of sizeable deficits—has now run its course, something that is not supportive either for the single currency.
Purely from a chart perspective, EURUSD has been broadly ranged between 1.1475 and 1.1775 since early summer but has been trending lower from the September highs. This could signal the formation of a descending channel: the lower bound would have been touched on 9 October and again in early November, while the upper bound could have been retested on 14 and 17 November near 1.1655. If this interpretation is correct, the short-term target could be around 1.14, also the late-July low. The RSI is currently at 39, showing no signs of strength. Moreover, a risk-off equity environment—like the one seen in recent days—typically supports the greenback.
In the event of a deeper decline, we would focus on the 1.1250 area. If the pair instead regains upward momentum, the levels to watch for now are 1.16, 1.1645, and 1.1695.
