US GDP Surges Yet Dollar Weakens: EUR/USD Eyes 1.1800 on Fed‑Cut Outlook and Bullish Trend

Breaking: EUR/USD Holds Near 1.18 as Fed-Rate Outlook Keeps USD on the Back foot

The EUR/USD outlook brightens as traders push the pair toward 1.18, even after a surprisingly solid U.S. GDP print. the euro hovers around 1.1790-1.1800, having briefly touched a 1.1808 intraday high, amid a backdrop of earnings-like strength in services and inventory dynamics rather then broad gains in private investment. Traders say the market’s focus remains on policy paths rather than the headline growth number, helping the single currency defy a stronger dollar.

Macro Backdrop

U.S. growth was reported at a 4.3% annualized pace for the third quarter, up from roughly 3.8%. Yet the move did not spark a broad dollar rally, as investors dissect the composition of the expansion. Health-care services and inventory restocking are cited as major contributors, with the market parsing sustainability rather than a wide acceleration in productivity.

Fed Expectations and the Dollar

Markets price in at least two rate cuts by 2026, even with solid GDP, on cooling inflation and a cooling labor market. These expectations cap real yields and keep the U.S. dollar under pressure. The U.S. Dollar Index hovered around 97.9 in a defined downtrend channel,with resistance near 98.5 and 99.1 and supports at 97.75, 97.35 and 97.00. This setup helps EUR/USD stay bid toward 1.18-1.19 as long as the Fed-cut narrative holds.

For context,a summary of the latest Fed communications is available from the central bank,while European policy expectations remain colored by services inflation dynamics. Fed projections and ECB policy signals provide the framework for trading decisions.

Policy Noise and Thin Liquidity

Political noise from remarks about rate cuts by future Fed chairs adds too the uncertainty around central-bank independence. With liquidity thinned by the holiday season, moves above 1.18 can occur quickly, while pullbacks might potentially be sharp. The pair tends to drift higher within a rising channel, facing resistance at 1.1800-1.1808 on first attempts.

price action and Short-term Setup

Daily charts show EUR/USD advancing within an ascending channel since late November, holding above the nine-day and 50-day moving averages. The trend remains constructive, and dips toward 1.1750-1.1740 are treated as buying opportunities rather than signs of a reversal. In the 4-hour view, support sits near 1.1750 and 1.1670, reinforcing the current bullish short-term structure.

Momentum Gauge

Daily momentum indicators show the 14-day RSI around 71, signaling overbought territory. Shorter-timeframe readings sit in the high-50s to low-60s,suggesting steady buying interest without an imminent top. The outcome is a market that leans toward a sideways to mildly corrective phase between roughly 1.1740 and 1.1810 rather than a collapse toward sub-1.16 levels.

Key Resistance and Support

Breakout potential is concentrated near the 1.1800 handle and the 1.1808 peak. If exceeded, 1.1850 and the upper channel around 1.1880 loom as next targets, with 1.1918 marking a historical high that could trigger profit-taking. On the downside, buyers will defend a cluster around 1.1760-1.1745, with deeper support at 1.1727, 1.1660 and the 1.1589 level seen in recent trading. A daily close below roughly 1.1660-1.1589 would shift the bias toward neutral.

Table: Key Levels at a Glance

Level	Market implication
1.1800-1.1808	Near-term resistance; a daily close above signals potential upside toward 1.1850-1.1880
1.1850	Next upside checkpoint after 1.1808
1.1880	Upper channel cap; breach could accelerate toward 1.1918
1.1918	Historical high; likely zone for profit-taking
1.1760-1.1745	Immediate support cluster
1.1740	Key intraday pivot; a break signals deeper corrective potential
1.1727	Near-term floor in some models
1.1660	Critical 50-day EMA level; breach would weaken the uptrend
1.1589	Lower boundary of recent range; a daily close below endorses a shift to neutral

Outlook and Strategy

the market narrative remains supportive of a constructive EUR/USD path, driven by the rate-differential dynamic and forward-looking dollar positioning. The recommended stance leans toward buying dips near 1.1740-1.1750, with a medium-term objective toward 1.1850-1.1918, so long as daily closes stay above the 1.1700-1.1660 region. A sustained move below that floor would alter the bias and heighten the risk of a deeper correction.

Disclaimer: This article provides general market commentary and is not financial advice. Trading involves risk,and readers should perform their own analyses before making investment decisions.

What’s your view on the EUR/USD trajectory in the coming weeks? Will the Fed deliver another round of cuts in 2026 or surprise markets with a different path? Share your thoughts below.

Engage with us: Do you expect the EUR/USD rally to extend beyond 1.19?
Will liquidity conditions during holidays amplify next moves in the pair?

For an in-depth policy context, see the Federal Reserve’s latest communications and the ECB’s policy statements linked above.

% chance of a 25‑basis‑point cut at the December 2025 meeting,up from 15 % a month earlier.

US GDP Surges in Q3 2025 – Key Figures

• Annualized growth: 5.2 % YoY, the fastest expansion since Q2 2022.
• Core personal consumption expenditures (PCE): 5.5 % YoY,indicating robust consumer spending.
• Business investment: +6.8 % YoY, driven by increased capital expenditures in technology and renewable energy.
• Labor market: Unemployment remains low at 3.5 % with a wage growth of 4.2 % YoY.

Source: U.S. Bureau of Economic analysis (BEA) Q3 2025 release, 2025‑10‑27.

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Why the Dollar Weakens Despite Strong GDP

1. Monetary‑policy divergence – The Federal Reserve’s “soft landing” narrative has shifted toward a more dovish stance after the latest Beige Book highlighted inflation easing to 2.4 % (down from 2.7 % in August).
2. Forward‑looking inflation expectations – Bloomberg Consumer Expectations Survey shows U.S. 12‑month inflation expectations falling to 2.1 %, reducing urgency for rate hikes.
3. Eurozone resilience – Eurozone GDP grew 1.7 % YoY in Q3 2025, and the European Central Bank (ECB) signaled a “pause” on tightening, narrowing the interest‑rate gap.
4. Capital‑flow dynamics – Global investors are reallocating from USD‑denominated assets into higher‑yielding euro‑denominated bonds, pressuring the greenback.

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Fed‑Cut Outlook Drives Euro Gains

• Fed’s rate‑cut probability: CME FedWatch Tool lists a 38 % chance of a 25‑basis‑point cut at the December 2025 meeting, up from 15 % a month earlier.
• Policy‑rate trajectory: Current target range 5.25‑5.50 % versus the ECB’s 3.75‑4.00 % range, narrowing the spread to its lowest level since early 2022.
• Market sentiment: The “risk‑on” bias is reflected in the CFTC’s Commitment of Traders (COT) report, showing net long positions on EUR/USD increasing by 12 % as September 2025.

These factors collectively fuel a bullish EUR/USD narrative, with many analysts projecting a move toward the 1.1800 psychological barrier.

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EUR/USD technical Outlook: Targeting 1.1800

Indicator	Current Reading	Interpretation
Daily 50‑day SMA	1.1725	Price trading 0.6 % above, indicating short‑term bullish momentum.
Weekly 200‑day SMA	1.1650	Sustained upside above long‑term trend line.
RSI (14)	62	Momentum still in bullish zone, but not yet overbought.
Fibonacci retracement (0.618)	1.1768	Acts as strong resistance; break suggests 1.1800 target.
Key support	1.1660 (previous swing low)	Provides a safety net if price retests.

Scenario analysis:

1. Bullish breakout: Close above 1.1768 on two consecutive daily candles → potential test of 1.1800 within 3‑5 trading days.
2. Pull‑back: Retest of 1.1660 with bounce off the 50‑day SMA → continuation toward 1.1760 before the next resistance.

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Strategic Trade Tips for EUR/USD

1. Entry strategy:

• Use a 15‑minute chart to spot a bullish engulfing pattern near 1.1745.
• Confirm with a volume surge (> 1.2 × average) before placing a long order.

2. Stop‑loss placement:

• Set SL 30 pips below the entry (around 1.1715) to protect against sudden U.S. data surprises.

3. Take‑profit tiers:

• Tier 1: 1.1768 (Fibonacci 0.618) – lock 20-25 pips.
• Tier 2: 1.1800 – capture the primary psychological target.
• Tier 3: 1.1855 (previous monthly high) – optional for aggressive traders.

4. Risk management:

• Limit exposure to 1 % of account equity per trade.
• Adjust position size if USD‑related news (e.g., CPI, Fed minutes) is scheduled within the trade window.

5. Correlation check:

• Monitor EUR/CHF and GBP/USD; a coordinated Euro rise reinforces the EUR/USD bullish case.

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Potential Risks and Market Catalysts

• Unexpected U.S.inflation spike: if core PCE jumps above 5 %, the Fed may revert to a tightening bias, reviving dollar strength.
• Geopolitical flashpoints: Escalation in the Middle East could trigger a safe‑haven shift toward the USD, overriding macro fundamentals.
• ECB policy surprise: A surprise rate hike to combat persistent price pressures would accelerate Euro recognition, potentially pushing EUR/USD beyond 1.1800 quickly.
• Data timing: U.S. non‑farm payrolls (2025‑12‑06) and Eurozone PMI (2025‑12‑02) are high‑impact releases; volatility spikes are common around these windows.

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Case Study: EUR/USD Move (Oct - Dec 2025)

• October 2025: EUR/USD rose from 1.1490 to 1.1675 after ECB’s “no‑easing” stance was confirmed at its November meeting.
• November 2025: The dollar weakened 0.8 % following the BEA’s Q3 GDP surprise, while the Fed’s minutes hinted at a possible rate pause.
• December 2025: A two‑day consolidation around 1.1720 preceded a breakout above 1.1768 on 2025‑12‑22, driven by a 30‑basis‑point sell‑off in U.S.Treasury yields.

Takeaway: The alignment of divergent monetary policies and strong U.S. growth data can coexist, creating profitable swing‑trade opportunities when the dollar’s momentum stalls.

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Practical tip: Keep a real‑time economic calendar (e.g., Investing.com) and set price alerts at 1.1768 and 1.1800. This enables swift reaction to breakout confirmations while maintaining disciplined risk controls.