The EUR/USD outlook shows some strength in the euro as the dollar drops due to increasing bets for a December Fed rate cut. Meanwhile, traders remained cautious ahead of key US inflation data that will continue shaping the outlook for US monetary policy. 

The greenback fluctuated on Friday when data showed a mixed picture of the US labor sector. Employers added 224,000 new workers in November, beating forecasts. This surge in job growth initially boosted the dollar. However, the unemployment rate rose from 4.1% to 4.2%, signaling cracks in the labor market. As a result, markets raised the likelihood of a 25-bps December Fed rate cut from 70% to 85%, weighing on the dollar. 

Meanwhile, the euro remained vulnerable ahead of the ECB meeting. At the same time, fears of likely US tariffs have kept downward pressure on the currency. 

A Reuters poll showed that most economists expect the European Central Bank to lower borrowing costs by 25-bps in December. At the same time, they expect 100-bps of cuts by the end of next year. 

Meanwhile, traders await the US CPI report for more clues on Fed rate cuts.  

EUR/USD key events today

Neither the US nor the Eurozone will release any key reports today. Therefore, the pair might remain in consolidation ahead of a busy week.

EUR/USD technical outlook: Bulls challenge the 1.0601 resistance

(Click on image to enlarge)

EUR/USD 4-hour chart

On the technical side, the EUR/USD price is trading in a range between the 1.0400 support level and the 1.0601 resistance level. This sideways move came after a downtrend that weakened at the 1.0400 support level. The range is a shallow corrective move that might end to allow the downtrend to continue. Therefore, bulls might find it difficult to breach the 1.0601 resistance level. Meanwhile, a break below the 1.0400 support level would signal a continuation of the downtrend. 

On the other hand, if bears are not strong enough to continue pushing EUR/USD lower, it might reverse to start an uptrend. Currently, bulls are pushing the price higher after retesting the 30-SMA support. However, the price must break above the 1.0601 resistance level to make higher highs and lows.

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