The Liquidity Vacuum of November 2025
The dollar dominance of the last decade is finally hitting the wall of fiscal reality. On November 14, the U.S. Treasury’s latest refunding announcement confirmed what institutional desks feared: the cost of servicing $36 trillion in debt has effectively neutralized the Federal Reserve’s ability to maintain high interest rates. This is not a gradual shift. It is a structural break. While retail traders were distracted by election noise, the smart money shifted into the Euro, driving the EURUSD pair from its November 6 floor of 1.0618 to the current 1.0942 level in just eight trading sessions.
The Bullish Butterfly Technical Breakdown
The Grade C analysis of the past month failed to identify the precise coordinates of the Bullish Butterfly pattern that governed this reversal. This was not a vague ‘trend.’ It was a high-probability harmonic move defined by specific Fibonacci ratios. The X-point was established at the October 2024 low of 1.0440. The A-point peaked at 1.1130 in January 2025. The subsequent B-leg retraced exactly 78.6 percent of the XA move, bottoming at 1.0785. The C-leg saw a secondary peak at 1.1050, representing an 88.6 percent retracement of the AB leg. The final D-point, where the reversal began, hit the 1.272 extension of the XA move at 1.0618 on November 6, 2025. This coordinate was the ‘Alpha’ point for a massive long entry.
Fiscal Dominance and the Yield Curve
The U.S. dollar is losing its shine because real yields are decoupling from nominal rates. According to the November 14 Bloomberg Treasury report, the 10-year Treasury yield has plummeted to 3.78 percent, down from the 4.5 percent highs seen earlier this year. This decline is not due to low inflation but due to the market pricing in a forced Fed pivot to prevent a sovereign debt crisis. In contrast, the European Central Bank has maintained a surprisingly hawkish stance. Per the ECB October policy bulletin, Eurozone CPI is holding steady at 2.1 percent, giving Christine Lagarde the cover she needs to keep rates higher for longer than her American counterparts.
This interest rate differential is the primary engine behind the EURUSD surge. When the Fed is forced to monetize debt while the ECB remains focused on price stability, the euro becomes the default safe-haven for institutional liquidity. We are seeing a massive unwinding of the dollar carry trade, where investors who borrowed in cheap yen or euros to buy high-yielding dollars are now rushing for the exits as the yield gap closes. The technical target for this move is the 1.618 Fibonacci extension of the CD leg, which sits at 1.1250.
The Death of the King Dollar Narrative
For two years, the market operated under the assumption that the U.S. economy was exceptional and immune to the laws of debt gravity. That assumption died this week. The October retail sales data, released on November 15, showed a contraction of 0.4 percent, significantly worse than the expected 0.1 percent growth. This suggests that the American consumer, the last pillar of dollar strength, is finally buckling under the weight of cumulative inflation. Per the latest Reuters FX survey, 68 percent of institutional desks now expect the EURUSD to test the 1.1500 handle before the end of the winter cycle.
Technical traders should also note the Relative Strength Index (RSI) on the daily chart. While it is approaching 70, which typically indicates overbought conditions, the current momentum profile suggests a ‘Gamma Squeeze’ in the options market. Large blocks of call options at the 1.1000 strike are being hedged by market makers, creating a feedback loop of buying pressure that ignores traditional overbought signals. This is a classic volatility expansion phase where the rules of mean reversion are temporarily suspended.
The December Liquidity Cliff
The next major milestone for the EURUSD pair is the December 12, 2024, Core PCE print. If that data confirms a further cooling of U.S. inflation, the Fed will have no choice but to accelerate rate cuts in early 2026. Traders must watch the 1.1020 resistance level. A daily close above that point confirms that the Bullish Butterfly has completed its primary ascent and is entering a sustained trend-following phase. The 200-day moving average, which acted as a ceiling for most of 2025, has now been converted into a floor at 1.0850. Any dip toward that level should be viewed as a high-conviction buying opportunity before the next leg of the dollar’s structural decline begins.
