The euro weakened against the U.S. dollar for a third straight session on Thursday, pushing EUR/USD below 1.1650 during Asian trading as stronger-than-expected U.S. economic data reinforced expectations that the Federal Reserve will keep interest rates unchanged in the months ahead. The move reflected renewed support for the dollar after signs that U.S. inflation and consumer demand remain resilient late in the year.
The pair traded near 1.1640, pressured by a firmer greenback following upbeat readings in Retail Sales, the Producer Price Index (PPI) and a lower unemployment rate last week. Together, the data strengthened the argument that the Fed has little urgency to ease policy, narrowing the appeal of the euro in relative yield terms.
Strong US Data Bolsters Dollar Momentum
Recent U.S. data surprised modestly to the upside, reinforcing confidence in the economy’s underlying strength. Retail Sales rose 0.6% in November, while the closely watched control group increased 0.4%, even after October figures were revised lower. At the same time, inflation indicators remained firm.
Core PPI climbed to 3.0% year over year in November, up from 2.9% in October, with earlier data also revised higher. While not signaling runaway inflation, the figures suggest price pressures remain sticky as 2025 draws to a close. For currency markets, that backdrop supports a “higher for longer” Fed stance, lending support to the dollar.
Key U.S. indicators shaping expectations include:
- Retail Sales: +0.6% in November
- Core PPI: 3.0% year over year
- Unemployment rate: eased last week
EUR/USD Technical Picture Turns Fragile
From a technical perspective, EUR/USD shows a neutral-to-bearish tone. On the four-hour chart, the pair trades below its 20-, 100- and 200-period SMAs, with the 20-period average near 1.1656 acting as immediate resistance. Momentum indicators point lower, while the RSI near 42 signals limited buying interest.
The daily chart paints a similar picture. The pair sits below its 20-day SMA at 1.1719, while the 100-day SMA near 1.1666 caps upside attempts. The rising 200-day SMA at 1.1582 remains a critical support level, viewed by traders as a near-term line of defense for euro bulls.
Fed Leadership Uncertainty Clouds Outlook
Beyond data, political uncertainty continues to complicate the dollar’s broader trajectory. Questions surrounding the future leadership of the Federal Reserve, with Chair Jerome Powell’s term ending in May, have added noise to markets. President Donald Trump has signaled a replacement announcement in coming weeks, leaving investors to speculate whether the next chair will favor a dovish or hawkish approach.
For now, however, solid U.S. data has outweighed political ambiguity. The dollar firmed modestly following the releases, even as Wall Street showed signs of rising risk aversion. Until clearer guidance emerges on Fed leadership and policy direction, EUR/USD is likely to remain range-bound, with downside risks dominating below the 1.1650 level.
