The Greenback’s Statistical Fog
The dollar’s hegemony is fracturing. As of November 17, 2025, the greenback is grappling with a 43-day statistical blackout caused by the longest government shutdown in American history. This data void has left the Federal Reserve flying blind, forcing a pivot from precision to risk management. Market participants are no longer trading on hard numbers: they are trading on the absence of them. While the Bureau of Labor Statistics remains unable to verify the October CPI figures, institutional capital is flowing toward the Eurozone, where policy clarity offers a rare sanctuary in a volatile macro-landscape.
The 43-Day Blackout and Fed Blindness
The Federal Open Market Committee (FOMC) delivered a 25-basis point cut on October 29, 2025, lowering the federal funds rate to a range of 3.50% to 3.75%. This move was not driven by cooling inflation, but by a desperate need to stabilize a labor market obscured by the shutdown. Per recent Reuters reports, nearly 65% of the typical inputs for Personal Consumption Expenditures (PCE) were unavailable at the time of the last meeting. This lack of transparency has eroded the ‘Dollar Exceptionalism’ narrative that dominated the first half of the year. Investors are beginning to question the sustainability of the US fiscal deficit, which has widened significantly as tax receipts stalled during the legislative impasse.
Harmonic Reversals and the 1.1660 Pivot
Technically, the EURUSD pair has completed a textbook Bullish Butterfly pattern on the daily timeframe. The ‘D’ leg of this harmonic structure found floor support at 1.1545 in mid-October, precisely as the market realized the Fed would be forced into a dovish stance to counter the shutdown’s economic drag. The pair is now testing the 1.1660 level, a multi-month point of control that served as a primary resistance zone throughout the third quarter. A sustained break above this ceiling targets the 1.1880 liquidity pool, where massive sell-side imbalances remain unfilled from the September sell-off. The Relative Strength Index (RSI) on the 4-hour chart shows a clear bullish divergence, with price making higher lows while momentum oscillators surge, suggesting that the current consolidation is a re-accumulation phase rather than a peak.
The Narrowing Transatlantic Yield Spread
The primary catalyst for Euro strength is the narrowing yield differential between the US 10-year Treasury and the German Bund. On November 17, 2025, the US 10-year yield stabilized at 4.13%, down from its 4.57% high a year ago. Conversely, the European Central Bank (ECB) has maintained a hawkishly neutral stance. In her October 30 press conference, Christine Lagarde confirmed the deposit facility rate would remain at 2.00%, citing a downward revision of Eurozone inflation to 2.1%. By holding steady while the Fed cuts, the ECB is effectively tightening by omission, making the Euro a more attractive carry-trade alternative.
| Indicator | United States (Fed) | Eurozone (ECB) | Spread/Difference |
|---|---|---|---|
| Policy Interest Rate | 3.50% – 3.75% | 2.00% (Deposit) | 1.50% – 1.75% |
| 10Y Government Bond Yield | 4.13% | 2.34% (Bund) | 179 bps |
| GDP Growth Forecast 2025 | 1.7% | 1.4% | 0.3% Gap |
| Core Inflation (Current) | 2.6% (Estimated) | 2.1% (Actual) | -0.5% |
The Unwind of the Dollar-Long Carry Trade
The technical breakout at 1.16 is not merely a chartist’s fantasy: it is the result of a massive liquidation of long-dollar positions by macro hedge funds. Throughout 2024 and early 2025, the ‘higher-for-longer’ Fed policy supported a lucrative carry trade. With the US funds rate now at its lowest level since November 2022, the incentive to hold dollars is evaporating. This is visible in the Commitment of Traders (COT) data, which shows institutional net-long positions on the Euro at their highest level in fourteen months. The dollar is no longer the default safe haven. Instead, the market is pricing in a ‘normalization’ where the Fed and ECB converge at a terminal rate closer to 3.0% by mid-2026.
Watch the upcoming December 10, 2025 FOMC meeting. The market is currently pricing a 52% probability of a fourth consecutive 25-basis point cut. If the Fed follows through, the yield spread will compress further, likely propelling the EURUSD toward the 1.1750 resistance zone. The critical milestone for the first quarter of 2026 will be the January 28 policy decision, where the Fed must decide if it will commit to a full return to the 3.25% neutral rate target.
