On Friday, the EUR/USD currency pair maintained the upward momentum established the previous day following a rebound from the 1.1100 level, its lowest point since May 2025. However, the pair failed to consolidate above the psychologically important 1.1200 level, despite continued support for the euro from the European Central Bank's hawkish rhetoric and several other favorable factors.

The ECB is signaling a high probability of interest rate hikes at its December meeting, as inflationary pressures intensify amid a rapid increase in energy prices.

Meanwhile, the US dollar continued to decline from its two-week high, partly amid expectations of progress in diplomatic efforts to resolve the situation in the Middle East and against the backdrop of falling US Treasury yields.

These developments are providing additional support for EUR/USD.

Among the key news developments is a report that US Vice President JD Vance sent a personal letter to Mohsen Rezaei, Secretary of Iran's Supreme National Security Council, proposing a return to negotiations aimed at reaching a peaceful settlement. In addition, Qatari mediators delivered an updated version of an agreement to the Iranian side, intended to end the confrontation involving Iran, the United States, and Israel.

However, market participants remain cautious due to the escalation of the conflict between Yemen's Houthi movement and Saudi Arabia. On Thursday, the Iranian Navy Command also reported that four oil tankers had struck naval mines in the Strait of Hormuz, increasing the risk of disruptions to energy supply routes from the Middle East.

Ongoing geopolitical uncertainty is keeping crude oil prices elevated.

This, in turn, is fueling inflation expectations and strengthening the position of supporters of a more restrictive monetary policy at the US Federal Reserve (Fed). Such a scenario could limit the US dollar's decline and prevent EUR/USD from extending its upward movement significantly.

According to CME Group's FedWatch tool, the market currently estimates the probability of another Fed rate hike in December at approximately 75%. Expectations strengthened following the release of US macroeconomic data on Thursday: US economic growth accelerated to 3.4% on an annualized basis in the third quarter, while inflation in September remained above the central bank's 2% target.

The current fundamental backdrop provides arguments in favor of buying the US dollar during local pullbacks. Therefore, before concluding that EUR/USD has established a sustainable bottom and is ready to resume its recovery, it would be prudent to wait for confirmation of the strength of the upward momentum.

Today, traders should wait for the release of the preliminary estimate of eurozone GDP growth for the third quarter, as well as the latest consumer inflation data for the region, to identify better trading opportunities.

From a technical perspective, the upward correction in EUR/USD stalled near the 20-day Simple Moving Average (SMA). The pair's failure to consolidate above this indicator suggests that its short-term upside potential remains limited, despite several price rebounds from support near 1.1100. To ease bearish pressure and transition to a more sustained recovery, the pair needs to break decisively above this level and consolidate there. However, as the oscillators remain in negative territory, the bears retain the advantage.

The table below shows the percentage change in the US dollar against the world's major currencies for the current trading day. The US currency recorded its most significant appreciation against the New Zealand dollar.