EUR/USD hits two-week high above 1.1650 as US Dollar slips despite easing Fed cut bets

• EUR/USD reaches 1.1656 but stalls below 1.1661 resistance as the US Dollar weakens despite reduced Fed cut expectations.
• Risk sentiment sours after the US government reopening, with markets pricing only a 50% chance of a December rate cut.
• Fed officials strike a mostly hawkish tone, while Eurozone industrial production rises 0.2% but misses forecasts.

EUR/USD advances past the 1.1600 figure on Thursday, hitting a two-week high of 1.1656, yet is unable to decisively crack the 50-day Simple Moving Average (SMA) key resistance at 1.1661. Catalysts such as the US government reopening and high US Treasury yields failed to boost the US Dollar (USD), pressured despite traders trimming bets for a December Fed rate cut.

The Euro (EUR) trades at around 1.1630, gaining 0.38% as the US Dollar Index (DXY), which tracks the performance of six currencies against the American one, drops 0.34% to 99.14.

Euro climbs past 1.1600 as DXY drops, though failure to clear the 50-day SMA tempers bullish momentum

Risk appetite has deteriorated as Wall Street registers losses amid the US government reopening. The release of crucial data for the Federal Reserve (Fed) ahead of next month's meeting keeps investors doubtful for another rate cut, and has priced in a 50% chance that the Fed might hold rates unchanged, according to the Prime Market Interest Rate Probability tool.

Some of the reasons could be that most Fed officials had remained slightly hawkish, despite acknowledging labor market weakness. On Thursday, St. Louis Fed Alberto Musalem, Cleveland's Beth Hammack and Minneapolis President Neel Kashkari expressed concerns about inflation. Conversely, Mary Daly leaned dovish but also emphasized that the Fed's inflation goal is 2%.

Aside from this, Industrial Production in the Eurozone improved in September after plunging -1.1%, and came to 0.2% MoM, missing forecasts of 0.7%. Recently, European Central Bank (ECB) member and Bundesbank President Joachim Nagel said that "any central banker on the ECB governing council should be eligible to succeed Lagarde," once her term ends.

Daily market movers: Euro unfazed by Fed officials hawkish tilt

• St. Louis Fed Alberto Musalem said that monetary policy is closer to neutral than to modestly restrictive. "Going forward, I think we need to proceed and tread with caution," as he noted that inflation is too high at 3%. Cleveland's Beth Hammack emphasized that restrictive monetary policy is needed to cool inflation, despite acknowledging that both of the dual mandate risks are in balance.
• Minneapolis Fed President Neel Kashkari said the economy is sending mixed signals but stressed that inflation remains "too high," running near 3%. In contrast, San Francisco Fed President Mary Daly said it is "premature to say definitely no cut or definitely cut" in December, noting that the Fed's dual mandate is currently balanced but acknowledging that the labor market has weakened.
• The US House of Representatives approved a stopgap funding bill late Wednesday in a 222-209 vote, restoring federal government operations through January 30, 2026, with several agencies funded through September 2026. However, the risk of another shutdown early in February 2026 still hangs over the fiscal outlook.
• The resolution clears the way for the release of a backlog of US macroeconomic data, though the White House has cautioned that October's employment and inflation reports may not be published due to the prolonged shutdown.
• Expectations that the September Nonfarm Payrolls could be released next week are rising, though the White House economic adviser Kevin Hassett said that the Unemployment Rate would not be published.
• German inflation figures remained steady at around 2.3% YoY in October, well within the European Central Bank (ECB) range.

EUR/USD technical outlook: Faces key resistance ahead of 1.1700

EUR/USD remains bearishly biased, though a daily close above 1.1600 clears the path to challenge a rally above the 50-day SMA at 1.1661. In the short term, bullish momentum is increasing as depicted in the Relative Strength Index (RSI). A decisive break of the 50-day SMA will expose 1.1700.

Conversely, if EUR/USD dives below 1.1600, the next support would be the 20-day SMA at 1.1585, followed by 1.1500. Further downside lies ahead below the August 1 swing low of 1.1391.