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12.11.2026 06:55 PM
The EUR/USD pair traded between 1.1114 and 1.1269 for a month. On Tuesday, the United States released its October inflation report, which triggered another wave of selling by bears. These selling pressures continued on Wednesday, pushing the euro slightly below the established range. At present, it is too early to say with certainty that the sideways movement has ended. The price could still sweep liquidity below the last two lows before reversing in favor of the euro. However, the price action over the past five trading days does not suggest a favorable outlook for the single currency. On Wednesday, there were no significant news releases that could have provided new support for the dollar. Therefore, the latest decline in EUR/USD appears rather unusual. There are no clear reasons for another appreciation of the US currency after its gains over the past three months. The market continues to price in the Fed's future monetary policy tightening, which is expected in a month and has already been priced in repeatedly.
Over the past two months, the fundamental backdrop has frequently favored the euro, but this has had virtually no impact on its exchange rate. Last week, it became known that the Republican Party had suffered a decisive election defeat, while inflation in the European Union accelerated to 4%. The US Congress will now be divided, and cooperation between Democrats and Republicans is likely to remain extremely difficult. As a result, many important government decisions could face significant delays. Another increase in inflation in the European Union points to further ECB monetary policy tightening, just as rising inflation in the United States points to further Fed tightening. If the market is pricing in another FOMC rate increase, it should also be pricing in further ECB rate increases. However, over the past few months, the fundamental relationships driving EUR/USD have been highly inconsistent.
It is worth recalling that one of the main reasons behind the dollar's appreciation over the past three months was the Fed's hawkish stance. However, in practice, the Fed's position is not particularly hawkish compared with that of other central banks. For example, the ECB is expected to implement its third rate increase in December, while the Bank of England has only just begun its monetary policy tightening cycle but could deliver as many as four full rounds of increases. The pound is responding to these factors, whereas the euro is not.
At present, there are no signs that the bearish move is coming to an end. Imbalance 24 remains valid, and the price has yet to react to it by forming a sell signal. Buyers need to invalidate Imbalance 24 and form bullish patterns before any meaningful recovery can be expected. This would require a sharp upward move in the euro, which has yet to materialize. The liquidity sweep above 1.1270, together with strong US labor market and inflation data, triggered another wave of selling. Buyers can now only hope for another liquidity sweep below the recent lows. Another bearish imbalance could form this week.
Overall, the fundamental backdrop continues to favor buyers. Despite the Fed's increasingly hawkish monetary policy stance, this is not the only factor determining exchange rates. Thursday's economic data provided no justification for renewed dollar buying, yet the market is currently showing no interest in selling the US currency under any circumstances.
On November 13, the economic calendar contains two scheduled releases, including the US PPI report, which deserves particular attention. Economic data may influence market sentiment during the second half of Friday's trading session.
The pair remains in the process of forming a bullish trend, which has been undergoing a corrective pause for an entire year. The fundamental backdrop shifted sharply in favor of bears nine months ago, but the four-year trend cannot yet be considered invalidated or complete. Buyers could resume their advance before the end of the year. However, their main opportunities are currently limited to the low of 1.1066 established in June last year and the low of 1.1105 recorded two weeks ago.
As for sellers, they have Imbalance 24 and the liquidity sweep above the recent high in their favor. A liquidity sweep is not, in itself, a pattern or trading signal, but it warns the market of a potential move in a particular direction. This is precisely the type of movement observed over the past five days. No trading signals have formed in recent days.
