EUR/USD. Analysis and Forecast

[Ben Graham]

Today, on Monday, the EUR/USD pair is declining for the third consecutive day, trading around 1.1760 after reaching a December high slightly above the psychological 1.1800 level. The U.S. dollar is strengthening as investors assess the real outcomes of talks between Donald Trump and Volodymyr Zelensky, while tensions between China and Taiwan are escalating. After Sunday's meeting with Ukrainian President Volodymyr Zelensky, U.S. President Donald Trump stated that reaching a peace agreement on Ukraine has become much closer. However, key issues, including the determination of the official status of Donbas, remain unresolved and are likely to hinder meaningful progress toward a long-term settlement.

The main event of the coming week will be the release of the minutes from the Federal Reserve's December meeting, at which it was decided to cut the key interest rate by 25 basis points and signal the possibility of further monetary policy easing in 2026. Investors remain convinced that weak labor market dynamics will force the Fed to cut rates at least twice next year.

The divergence between the relatively tight stance of the European Central Bank and the more dovish policy of the Federal Reserve—which is expected to continue lowering borrowing costs—creates an obstacle to any significant strengthening of the U.S. dollar.

On Monday, China announced the start of large-scale military exercises around Taiwan, while authorities in Taipei confirmed the presence of several Chinese vessels near their territorial waters. These maneuvers represent another round of escalation in this sensitive region and are likely to support demand for the U.S. dollar as a safe-haven asset.

Today, for better trading opportunities, attention should be paid to the release of U.S. pending home sales data for November. The indicator is expected to rise by 1% following a 1.9% increase in the previous month.

Reports published last week showed that the U.S. economy grew faster than forecast—GDP increased at an annualized rate of 4.3% in the third quarter, following growth of 3.8% in the second quarter. Nevertheless, the dollar did not receive significant support from these data.

From a technical perspective, the pair has found support at the 1.1760 level, below which the 9-day EMA serves as support. Meanwhile, oscillators on the daily chart remain positive, indicating that bulls are not ready to give up. The main obstacle for bulls is the psychological 1.1800 level, above which the pair will encounter resistance in the 1.1808–1.1817 level.

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