## Multiple Negative Factors Converge, EUR/USD Breaks Key Psychological Level 1.1600

Is it a good time to buy euros? Perhaps caution is warranted. Under the dual pressures of the Fed's hawkish policy shift and rising risk aversion, the euro/USD has recently underperformed, breaking below the critical level of 1.1600.

### Fed's Stability Expectations Support the Dollar

The trading logic in the currency markets is quietly changing. According to CME FedWatch data, the probability of a 25 bps rate cut at the December meeting has fallen to 43%, meaning there is a 57% chance that the Fed will keep rates unchanged. This shift directly fuels a rebound in the dollar.

Internal voices within the Fed are also becoming more cautious. Vice Chair Philip Jefferson admitted that upside inflation risks may be easing, but downside risks in the labor market are increasing, with companies remaining cautious in hiring and layoffs. He described the current monetary policy as "somewhat restrictive." Governor Christopher Waller hinted that there is limited room for rate cuts, although he believes the soft labor market provides reasons for a possible rate cut in December. These subtle policy disagreements reinforce market expectations that the "rate hike cycle is nearing its end."

### Risk Sentiment Sudden Shift, Safe-Haven Funds Pour into the Dollar

Beyond expectations for central bank policies, changes in market sentiment are also driving the dollar higher. Nvidia will release earnings on Wednesday, heightening concerns about an AI bubble, prompting a surge of safe-haven capital into the dollar. Meanwhile, the U.S. government is resuming its data release schedule, with key economic indicators such as Thursday’s non-farm payrolls and Friday’s real income data upcoming. Traders tend to hold more dollar positions ahead of these releases.

The US Dollar Index (DXY) reflects this trend, tracking the dollar against six currencies, currently up 0.20% at 99.47.

### European Central Bank Signals Caution, EUR Faces Policy Expectation Gap

European Central Bank Vice President Luis de Guindos stated that inflation in the eurozone is moving toward the ECB’s 2% target, which could have supported the euro. However, he also warned that rising tariffs and high sovereign debt levels pose structural risks that could amplify volatility if market sentiment shifts suddenly. This "good news is less than optimistic" signal contrasts sharply with the strong stability expectations from the Fed.

The latest New York Fed Empire State Manufacturing Index for November shows that current business conditions are better than expected, with increases in new orders and employment, and ongoing declines in prices paid. However, the six-month outlook has significantly worsened, falling from 30.3 to 19.1, revealing a pessimistic market sentiment about the medium-term economic outlook.

### Technical Breakdown, Bearish Momentum May Continue

Traders’ technical indicators tell the same story. EUR/USD declined by 0.30% during North American trading, falling from a high of 1.1624 to 1.1589, further breaking below the psychological level of 1.1600. The 50-day simple moving average (SMA) at 1.1581 has become a key support level for sellers. The Relative Strength Index (RSI) shows a U-shaped reversal, indicating that bearish pressure remains.

If the dollar’s strength persists, the next key support for EUR/USD is around 1.1550. A break below this level would open the door to 1.1500. To regain control, buyers need to push the exchange rate back above 1.1600, with subsequent targets at the 50-day SMA (1.1656), 100-day SMA (1.1659), and potentially reaching 1.1700 on further gains.

### Is it a good time to buy euros? Not yet

Considering macro policies, market sentiment, and technical signals, the euro currently faces a relatively unfavorable environment. The strengthening of the Fed’s stability expectations, influx of safe-haven funds, and the relatively cautious signals from the ECB are all supporting the dollar’s appreciation. The technical breakdown confirms the dominance of the sellers. Until key economic data is released and market sentiment stabilizes, aggressive buying of euros may not be wise.