Weekly Euro FX Futures Outlook
The Euro (E6H26) saw significant volatility last week, capitalizing initially on a broadly weaker Dollar after the U.S. Federal Open Market Committee (FOMC) cut the federal funds target range by 25 basis points (bp) and announced liquidity-boosting short-term bond purchases. This action drove the Dollar Index (DXY00) down to a 1.75-month low. However, Euro gains stalled late in the week as the Dollar found renewed support on Friday, fueled by a sharp selloff in U.S. technology stocks and hawkish commentary from various Federal Reserve officials pushing back on the dovish sentiment. The spot EUR/USD pair (^EURUSD) last recorded a minor move down of -0.04%.
Positioning & Flows
Our primary positioning gauge, ETF flows, shows slight weakness in the Euro, indicating participants reduced exposure at the end of the trading week. The Euro Trust ETF (FXE) recorded a net outflow of −$5.4M during the period of December 8-12. This minor outflow suggests short-term conviction for EUR strength may be waning following the initial surge. Structurally, Commitment of Traders (COT) data, reflecting positions as of November 18, 2025, shows that Non-Commercial traders (large speculators) held a net long position, indicating a structural bullish bias leading into the recent rally. During that reporting week, Non-Commercial traders significantly reduced their short positions by 17,377 contracts while adding 8,041 long contracts.
Fundamentals
The fundamental outlook for the coming week is defined by a fierce debate over U.S. monetary policy and upcoming data releases. While the Fed initiated a dovish turn with its rate cut and liquidity boost, several Chicago, Kansas City, and Cleveland Fed presidents countered this late in the week, expressing concerns about persistent inflation and favoring "modestly restrictive" policy. This internal conflict within the Fed creates policy uncertainty. The market's attention is now squarely focused on key economic releases, particularly inflation data, due this critical week, which could determine if the dovish narrative holds or if the hawkish minority gains traction.
Open Interest, Volume & Volatility
The equity market closed the week in a distinctly risk-off manner, highlighted by the S&P 500 falling to a 1.5-week low and the Nasdaq 100 dropping to a 2-week low on Friday. This flight to safety boosted the Dollar, acting as a headwind for Euro strength. The VIX (VIF26) stood at 18.6000. This rising volatility regime in risk assets typically favors holding U.S. Dollar liquidity over cyclical currencies like the Euro, countering any momentum the Euro gained earlier in the week.
Seasonality
Historical data strongly supports a bullish seasonal bias for the Euro in December. December has consistently been one of the strongest months for the Euro versus the Dollar, typically showing average gains of around 1.2–1.6% across multi-decade samples, often linked to year-end flows and U.S. dollar selling/rebalancing.
Technical Levels & Trade Ideas
The Euro FX Mar '26 futures (E6H26) last traded at 1.17885.
• Key Resistance: Near-term resistance lies at 1.18070, followed by 1.18200. A decisive break and close above 1.18370 would target higher technical objectives.
• Key Support: Immediate psychological support is near 1.17770, with the next major level at 1.17600. Breaking the Fibonacci 61.8% retracement level at 1.14159 would suggest a major structural shift lower.
Closing Outlook
Forward-Looking Bias: Neutral/Range-Bound, Awaiting Fundamental Catalyst.
The Euro enters the week in a stalemate between compelling, fundamental tailwinds (seasonal strength, recent dovish Fed action) and immediate technical headwinds (negative short-term ETF flows, high volatility, and strong Dollar liquidity demand from equity panic).
Base Case: The Euro trades defensively between 1.17770 support and 1.18070 resistance, attempting to consolidate above key support ahead of U.S. inflation data. The bullish seasonal factor may prevent sustained losses.
Alternative Case (Bullish Breakout): A weaker-than-expected U.S. inflation report or a return to risk-on sentiment in equities could allow the strong seasonal bias to take hold, driving a break above 1.18070 toward 1.18370.
Preferred Stance for the Week: Neutral-Slightly Long Bias. Given the seasonal tailwind and proximity to support, favor short-term long trades only upon clear confirmation of Dollar weakness, ideally trading small size until the critical U.S. inflation data clarifies the near-term path for the Fed. Avoid aggressive positioning until fundamental cross-currents resolve.
Trade smart,
Joseph O.
SmartMoneyTrade.com
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