EUR/USD Near 1.1650 as Fed Cut Odds Rise; EUR/GBP Holds Above 0.8700

Quick take

EUR/USD is trading near 1.1645–1.1650 after German industrial production surprised to the upside and markets pushed up probability of a December Fed cut. At the same time EUR/GBP is holding modestly above 0.8700 as speculation that the ECB is done cutting rates contrasts with rising BoE cut expectations driven by softer UK data and autumn budget concerns. These developments create short-term opportunities for momentum and buy-the-dip strategies, provided traders manage event risk around upcoming Fed and European communications.

What’s driving the move

US rate expectations and Fed communications

CME FedWatch and market pricing have lifted the chance of a 25bp Fed cut in December, weighing on the US dollar. Attention is centred on the Fed’s upcoming meeting and Powell’s press conference (and the SEP/dot plot), where any shift toward a less dovish tone could quickly reverse USD weakness and pressure EUR/USD. Traders should treat current positioning as sensitive to the Fed’s language.

Eurozone/German data

Germany’s industrial production printed +1.8% month-on-month (Oct) versus a negative consensus, and Sentix investor confidence improved to -6.2 from -7.4. Stronger macro prints strengthen the case that ECB easing expectations can be pushed back, supporting EUR across pairs including EUR/USD and EUR/GBP.

UK fiscal and labour dynamics

In the UK, softer inflation prints, a cooling labour market and tax concerns from the autumn budget have increased markets’ expectations of Bank of England rate cuts. That has placed downside pressure on GBP, contributing to EUR/GBP’s move above 0.8700.

Technical outlook

EUR/USD

Short-term technicals show EUR/USD trading around 1.1645 with immediate resistance near 1.1650–1.1675. A sustained break above 1.1675 would open a path toward 1.1750 in the near term. Support sits around 1.1600 and then 1.1550; a strong USD reaction to Fed communications could test those levels. Momentum indicators currently favour upside but are event-sensitive.

EUR/GBP

EUR/GBP is holding just above 0.8700. Key near-term resistance is at 0.8750, while support lies at 0.8670 and 0.8600. The pair is effectively trading on relative central bank expectations—if the ECB signals continued restraint versus a dovish BoE, EUR/GBP can extend gains.

Trade ideas and setups

1) EUR/USD — momentum buy on hold above 1.1650

Setup: Buy on a confirmed hold above 1.1650 (e.g., 1-hour close), targeting 1.1750 with an initial stop below 1.1600. Rationale: Fed-cut pricing and stronger Eurozone data create a favourable risk/reward for short-term EUR strength. Note: reduce size or hedge into the Fed press conference.

2) EUR/GBP — buy-on-dips into 0.8670–0.8700

Setup: Look to accumulate on shallow dips toward 0.8670 with a target of 0.8750 and stop below 0.8600. Rationale: ECB perceived end to cuts vs. rising BoE cut odds gives EUR upside versus GBP in the near term.

Execution and risk management

Given elevated event risk (Fed press conference, BoE/ECB commentary and UK fiscal updates), use defined position sizes, staggered entries and clearly placed stops. Traders who want to automate entry, scaling and exit can test an Forex Trading Bot or the Trade Assistant Bot to manage trade execution and reduce emotional slippage.

Risks to monitor

- Hawkish surprises at the Fed (a "hawkish cut" or guidance implying a less dovish path) would strengthen the USD and trigger rapid EUR/USD reversals.
- Any disappointing Eurozone follow‑through or softer German data could undermine EUR strength.
- UK fiscal measures or stronger-than-expected UK labour/inflation prints would lift GBP and pressure EUR/GBP.
- Market volatility around central bank communications can widen spreads and increase slippage; consider liquidity when sizing positions.

How automated trading and AI can help

Short-term FX moves driven by central bank expectations and fast news events suit systematic approaches: automated trading helps enforce discipline on entries, risk limits and scaling, while AI models can screen macro signals and optimize timing. If you trade across multiple pairs or use momentum and event-driven strategies, combining manual oversight with an AI trading bot can improve execution and consistency. For traders active in crypto trading as well, automation that spans both crypto and forex reduces workload and enables faster rebalancing.

Practical tools

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Conclusion

EUR/USD’s test of 1.1650 and EUR/GBP’s hold above 0.8700 reflect a market that is pricing in a US rate cut while rewarding stronger Eurozone data and a less hawkish ECB outlook. Short-term upside looks plausible, but traders must respect event risk around Fed, ECB and UK updates. Whether you prefer discretionary setups or want to scale with automated trading, use disciplined risk management and consider testing an AI trading bot to execute, manage and backtest strategies across forex and crypto trading markets.

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