EUR/USD daily chart
A more dovish Fed and less dovish ECB are the major drivers for EUR/USD this week, with the pair accelerating gains since Wednesday from 1.0800 to 1.1000 overnight. The latter figure level is holding back the upside momentum for now, after having acted as a key resistance in limiting gains at the end of November as well.
This keeps price action in a rather interesting spot ahead of the euro area PMI data later today. Will the data vindicate the ECB’s stance of keeping rates higher for longer? Or will it pressure the central bank into acting quicker going into next year?
Besides the data, the other consideration is that perhaps we are reaching a point where it will be tough for traders to price in more dovishness for the Fed for next year. The odds of a March rate cut now stands at ~80%, so that is not leaving a whole lot of room to work with if traders are to stick with the aggressive pricing.
That being said, the same can be said for the ECB. And even more so considering the pushback by the central bank yesterday. The odds of a March rate cut are at ~55% currently. So, any shifts in that will depend on the upcoming data and the PMIs are ones that tend to provide some leading indication of the economic outlook.
For trading today, there are large option expiries for EUR/USD at 1.0950 so that might help keep price action more contained in case there is any downside push. But for the topside, it might require something more to crack resistance at the 1.1000 mark.