EUR/USD Outlook: The Euro Loses Ground Ahead of the Release of the Fed Minutes

Over the past four trading sessions, the EUR/USD pair has begun to show an emerging bearish bias, posting a short-term decline of just over 0.3%. For now, selling pressure has remained firm as the U.S. dollar has started to see a rebound in confidence ahead of the upcoming release of the Federal Reserve minutes, which will provide insight into the central bank’s outlook for the year ahead. If this event manages to restore strength to the dollar, the bearish pressure currently observed in EUR/USD could become more pronounced in the coming trading sessions.

The Fed Minutes Are Approaching

Today, December 30, the Federal Reserve is scheduled to release the minutes from its latest policy meeting, offering greater clarity on the path the central bank intends to follow heading into 2026. At this stage, the minutes are expected to shed light on the internal vote that led to the most recent rate cut, as well as provide signals on whether the Fed remains aligned with future rate reductions or is instead leaning toward a more neutral stance, depending on inflation trends and concerns surrounding a potential slowdown in employment.

At present, the CME Group probability outlook for next year’s Fed decisions has begun to adjust as the release of the minutes approaches. Markets currently assign probabilities of 83.9% and 49.3% for the Federal Reserve to keep interest rates unchanged at the January 28 and March 18, 2026 meetings, respectively. This pricing suggests that investors expect the Fed to adopt a more neutral policy stance during the early months of 2026, moving away from an approach centered on aggressive rate cuts.

Source: CMEGROUP

Expectations of a more neutral rate environment have started to generate a modest rebound in U.S. dollar demand, following several weeks of declines that had allowed other currencies, including the euro, to gain ground. This shift is partly explained by a rebound in U.S. Treasury yields, as expectations of stable rates have helped halt the prolonged decline in yields. At present, yields have stabilized around the 4.1% level and have begun to show a slightly positive slope along the yield curve. This development has restored short-term appeal to U.S. Treasuries and could support foreign capital inflows, reinforcing dollar demand and acting as a confidence catalyst for the U.S. currency in the coming sessions.

Source: TradingEconomics

Against this backdrop, the period leading up to the release of the Fed minutes appears to have contributed to a partial recovery in the U.S. dollar, supported by the stabilization in Treasury yields. Should the minutes confirm that the central bank is inclined to maintain a neutral rate stance heading into 2026, this could further strengthen short-term confidence in the dollar and sustain more pronounced selling pressure in EUR/USD. Conversely, if the document suggests that the Fed continues to consider more aggressive rate cuts for 2026, the structural weakness that has characterized the dollar in recent weeks could re-emerge.

 

EUR/USD Technical Outlook

Source: StoneX, Tradingview

• The broad sideways range remains in place: Since mid-June, EUR/USD has traded within a wide consolidation range, capped at 1.18231 and supported near 1.15104. Although bullish momentum recently pushed price back toward the upper boundary of the range, it was not sufficient to trigger a sustained breakout. As a result, this structure remains the most relevant technical reference on the chart. As long as the pair fails to regain solid buying momentum, it is likely to remain in an environment of indecision, extending the life of the broader range in the sessions ahead.

 

• RSI: While the RSI remains above the neutral 50 level, it has started to post consistent declines and a downward slope, suggesting that average buying momentum over the past 14 sessions is weakening. If this dynamic persists, a phase of price indecision could take hold in EUR/USD over the coming trading sessions.

 

• MACD: The MACD is oscillating close to the neutral zero line, indicating that a neutral bias has taken over short-term moving average momentum. As long as this behavior continues, price action may remain in a short-term consolidation phase.

 

Key Levels:

• 1.18231 – Key resistance: The upper boundary of the sideways range and the area corresponding to this year’s highs. A sustained bullish breakout above this zone could invalidate the range structure and activate a broader bullish trend toward the close of 2025.

 

• 1.16869 – Nearby barrier: A level associated with recent neutrality. As long as price remains near this area, a period of indecision may persist, reinforcing the relevance of the broader range.

 

• 1.16329 – Major support: A level aligned with the 50-period simple moving average. Sustained selling pressure toward this area could reactivate a bearish bias into the final sessions of 2025 and the early part of 2026.

 

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25