EURUSD gains strength amid widening policy divergence between Fed and ECB

On Wednesday, the EURUSD currency pair tried to maintain the upward movement that began in late November, driven by a weaker dollar. However, there are signs of buyer exhaustion near the strong resistance level at 1.16460.

From a technical standpoint, a healthy correction may be expected. The Chaikin Oscillator, despite still being in positive territory, is losing upward momentum. The Stochastic Indicator paints a similar picture, remaining neutral but having recently formed a bearish crossover. The clearest warning comes from the Commodity Channel Index (CCI), which has entered the overbought zone. This, combined with the price testing the upper Bollinger Band, presents a classic case of fading momentum near strong resistance, increasing the chances of a short-term pullback to the indicator’s middle line.

The fundamentals favor the euro in the medium term due to the growing monetary divergence between the Federal Reserve (Fed) and the European Central Bank (ECB). Market participants are pricing in a near-certain rate cut in the US on December 10. They also anticipate that the Fed will continue this easing cycle, reducing borrowing costs by a total of 90 basis points next year. Such dovish forecasts are driven by a likely change in the central bank’s leadership. In contrast, the ECB appears poised to end its rate-cutting cycle, providing underlying support for the single currency.

However, the weakness of the European economy is capping the pair’s ascent, with Germany being the biggest concern. Recent data show that the country’s consumer confidence has fallen to its lowest level this year. Given these murky circumstances, industry associations are revising their production forecasts downward. This creates a local fundamental ceiling for the euro, precluding its near-term upside potential against a weaker dollar, which reinforces technical signals of an impending correction.

Keep in mind the following trading strategy:

Buy EURUSD during a retreat from resistance at 1.15760. Place Take profit at 1.17000 and Stop loss at 1.15250.

This forecast remains relevant between December 3 and December 10, 2025.