EUR/USD Nears 1.1600 as Fed Cut Odds Surge; USDCAD Slides on USD Weakness

Overview

EUR/USD has extended gains for a third consecutive session, trading around 1.1580 and closing in on the 1.1600 mark as the market reprices aggressive Fed easing. The sudden shift in Fed expectations — with CME FedWatch pricing roughly an 85% chance of a 25bp cut in December — and a pullback in 10‑year U.S. Treasury yields (near 4.00%) are the primary drivers. That same USD softness is visible in commodity‑linked and FX crosses: USDCAD has slipped toward 1.4080 as the DXY trades lower near 99.7.

What’s Driving the Move

Fed expectations and yields

Market pricing for a December cut has moved sharply: CME FedWatch now assigns about an 85% probability to a 25bp Fed cut. Comments from NY Fed President John Williams and cooler core PPI and mixed retail sales data have reinforced a dovish narrative. As yields fall, non‑yielding and carry‑sensitive assets benefit, and the USD faces downward pressure.

Data and risk sentiment

Recent US prints — softer core PPI and moderate retail sales — give the Fed room to consider rate cuts, at least in market pricing. That has increased risk appetite and reduced demand for the dollar as a safe‑haven. However, market attention remains sensitive to any stronger‑than‑expected US data or Fed pushback that could quickly reverse the theme.

Technical Outlook

EUR/USD (symbol: EURUSD)

Price: ~1.1580 (third straight session of gains). Short‑term technical bias is bullish while price holds above recent intraday support. Near‑term levels to watch:

• Immediate resistance: 1.1600 — a break and hold above this level would increase odds of extension toward 1.1650–1.1700.

• Support: intraday support around 1.1520–1.1500 and deeper technical support near 1.1400 if USD strength returns.

Trading note: momentum indicators have room to run in the short term, but traders should be mindful of exhausting rallies into 1.1600 and use disciplined stops given headline risk. For a contrasting downside scenario and historic context around the pivot, see where the euro sometimes slides below 1.1600.

USD/CAD (symbol: USDCAD)

Price: sliding toward 1.4080 as DXY weakens and CAD benefits from risk tone and stable domestic fundamentals. Key levels:

• Near support: 1.4080–1.4050 — a sustained break lower opens 1.3950 as a medium‑term target.

• Resistance: 1.4120–1.4150 — a reclaim above there would suggest short‑covering and potential reversal higher.

Trading note: the pair is positioned for further CAD strength while Fed cut odds remain elevated, but watch oil moves and BoC communications — both can alter CAD momentum quickly. More on CAD drivers is available in our write-up on USD/CAD near 1.40.

Risks to the Trade Case

• Hawkish surprises in US data or explicit pushback from Fed officials could reprice cuts and strengthen the dollar, reversing EUR/USD and USDCAD moves.

• Sudden geopolitical or risk‑off shocks can lift the dollar even as cuts become likelier, capping gains in risk‑sensitive pairs.

• For USDCAD, an unexpected BoC policy shift or an oil price surge would support CAD and accelerate moves beyond current technical targets.

Practical Trade Ideas & Risk Management

Long EUR/USD (momentum on elevated Fed cut odds)

• Entry: on a clean break and retest above 1.1600 or on dips to 1.1520–1.1500 with confirmation.

• Targets: 1.1650 (first), 1.1700 (secondary).

• Stop: below 1.1480–1.1450 depending on time horizon. Use position sizing consistent with account risk limits.

For additional tactical context on buying dips in EUR/USD when Fed cuts are priced, see our analysis on buy-on-dip setups.

Short USDCAD (favor CAD while DXY under pressure)

• Entry: consider shorting on failure to clear 1.4120–1.4150 or adding on a break below 1.4050.

• Targets: 1.3950 then 1.3850 if momentum continues.

• Stop: above 1.4200–1.4250; monitor oil and BoC commentary closely.

How Automated Tools and Execution Help

Fast changes in Fed pricing and yields increase intraday volatility. Retail traders can benefit from disciplined execution, automated risk controls and backtested strategies to avoid emotional errors. For forex traders evaluating these setups, a dedicated Forex Trading Bot or the Trade Assistant Bot can help automate entries, scale positions, and enforce stop losses. These tools also integrate well with broader automated trading workflows used in crypto trading and other markets.

Conclusion

Surging Fed‑cut odds and softer U.S. yields are the dominant near‑term theme: EUR/USD looks positioned to test 1.1600 and potentially higher while USDCAD is vulnerable to further downside near 1.4080. Traders should balance opportunity with clear risk controls — watch US data, Fed commentary and commodity moves for sudden regime shifts. Automated trading and disciplined execution can help manage fast‑moving markets and reduce behavioral mistakes.

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