EUR/USD Declines Toward 1.1550 as Prospects of a U.S. Government Shutdown Resolution Strengthen

Market Overview

The EUR/USD pair extended its decline for a third consecutive session on Monday, hovering near 1.1550 during the European trading hours. The Euro weakened as the U.S. Dollar (USD) gained traction, supported by rising optimism that the record-long U.S. government shutdown could soon be resolved.

According to Bloomberg, a group of centrist Senate Democrats has backed a proposal to reopen the government, ensuring back pay for federal workers and restoring delayed federal transfers. The plan reportedly includes partial funding through January 30 and full-year allocations for key departments — a development that has boosted market confidence in U.S. political stability and fiscal continuity.

Fundamental Overview

Earlier in the session, the USD softened briefly after U.S. consumer sentiment fell to its lowest level in over three years. The University of Michigan’s Consumer Sentiment Index declined to 50.3 in November — the weakest reading since June 2022, down from 53.6 in October and below forecasts of 53.2.

Despite this soft data, the Dollar regained strength as progress toward ending the government shutdown restored optimism about near-term U.S. fiscal stability.

Meanwhile, the Euro may find medium-term support from a diverging monetary outlook between the European Central Bank (ECB) and the Federal Reserve (Fed). Market expectations for an ECB rate cut by September 2026 have dropped to 45%, compared with over 80% in October, suggesting that policymakers remain cautious about easing too quickly.

ECB officials including Francois Villeroy de Galhau and Joachim Nagel emphasized policy flexibility and vigilance toward inflation trends. Vice President Luis de Guindos also noted that any temporary decline in inflation below the 2% target is unlikely to alter the ECB’s medium-term stance.

Technical Analysis – Daily Chart

Technical Overview

The EUR/USD pair remains under bearish pressure, trading within a downward channel but showing limited near-term support.

• The pair is currently above the 5- and 20-day Simple Moving Averages (SMA), indicating mild short-term buying pressure despite the broader downtrend.
• The Relative Strength Index (RSI) sits in the buying zone, suggesting potential for short-term stabilization.
• The Stochastic oscillator points to a neutral momentum, implying a consolidation phase before the next move.

Key Levels to Watch:

• Immediate Resistance: 1.1608
• Immediate Support: 1.1531

If the pair fails to hold above 1.1550, deeper downside toward 1.1529 may follow. A sustained break above 1.1608, however, could signal short-term recovery.

Trading Outlook

Following a strong upward move last week, EUR/USD has lost bullish momentum. Repeated failures to sustain gains above the 100 EMA resistance zone have increased the likelihood of a technical correction.

If the pair confirms rejection from the current resistance area, a fresh downward move could begin — with support seen near the 1.1530–1.1520 zone.

Trade Suggestion:

• Entry (Sell Limit): 1.1577
• Take Profit: 1.1529
• Stop Loss: 1.1606

Frequently Asked Questions (FAQ)

Q1: Why is EUR/USD falling today?
The pair is weakening as optimism grows that the U.S. government shutdown may soon be resolved, which has strengthened the U.S. Dollar.

Q2: How did U.S. consumer sentiment affect the market?
The University of Michigan Sentiment Index fell to a multi-year low, briefly weighing on the Dollar before shutdown resolution hopes offset the impact.

Q3: What role is the ECB playing in current Euro dynamics?
The ECB’s cautious stance and reduced expectations for rate cuts have provided some long-term support for the Euro, though short-term pressures remain due to USD strength.

Q4: What are the key technical levels for EUR/USD?
Resistance lies near 1.1608, while support is found at 1.1531. A break below support could trigger further downside toward 1.1500.

Q5: How does the U.S. government shutdown affect currency markets?
A shutdown undermines U.S. fiscal stability, typically weakening the Dollar. However, signs of resolution often strengthen the Greenback as political risks subside.

Disclaimer

This report is for informational and educational purposes only and does not constitute investment advice or trading recommendations. Market conditions are subject to rapid change, and past performance is not indicative of future results. Always perform independent analysis or consult a licensed financial professional before making trading decisions.