The Geometry of the 1.0415 Reversal
Math dictates the trend. While retail sentiment remained fixated on a dollar breakout, the EURUSD pair completed a textbook Bullish Butterfly harmonic pattern on November 14, 2025. This structural reversal triggered at the 127.2% Fibonacci extension of the XA leg, specifically at the 1.0415 handle. This is not a vague shift in sentiment. It is a technical liquidation of overextended short positions that had been building since the Eurozone’s October CPI print surprised to the upside.
Breaking Down the Bullish Butterfly
Precision defines the current entry window. The X-point originated at the October 1 low of 1.0450. The subsequent rally to 1.0920 (A-point) set the scale. The B-point retracement held firmly at 1.0580, representing a 78.6% correction. When the pair breached the prior low to hit 1.0415 yesterday, it hit the D-point completion zone. Institutional buy orders clustered at this level are now driving the price toward the first structural target of 1.0760. High-frequency trading (HFT) algorithms are currently front-running the 38.2% retracement of the CD leg, creating a liquidity vacuum above 1.0850.
| Trade Parameter | Specific Price Level | Technical Rationale |
|---|---|---|
| Primary Entry | 1.0815 – 1.0840 | Post-D Point Confirmation |
| Stop Loss | 1.0390 | Below 161.8% XA Extension |
| First Take Profit | 1.1025 | 61.8% Retracement of CD Leg |
| Secondary Target | 1.1240 | Structural Resistance Swing High |
Macro Catalysts: The Fed November Capitulation
The dollar is bleeding. According to the latest Federal Reserve H.10 report, the trade-weighted dollar index (DXY) has dropped 1.4% in the last 72 hours. This move follows the November 12 FOMC minutes which signaled a definitive end to the quantitative tightening (QT) cycle. The market is now pricing in a 65% probability of a 25-basis point cut in January. Yield differentials between the US 10-Year Treasury and the German Bund have narrowed from 195 bps to 172 bps in just four trading sessions. This compression makes the dollar-carry trade increasingly expensive to maintain.
Institutional Positioning and Gamma Walls
Gamma exposure is shifting. Options data from the Chicago Mercantile Exchange (CME) shows a massive build-up in call gamma at the 1.0900 and 1.1000 strikes for the December expiry. Dealers are currently short these calls and must buy EURUSD spot to hedge their positions as the price rises, creating a recursive feedback loop of buying pressure. The Relative Strength Index (RSI) on the daily timeframe has surged from an oversold 28.5 to a neutral 52.1. This is not a sign of an overbought market. It is a sign of a trend transition. Momentum oscillators are only now entering the ‘power zone’ where sustained rallies occur.
The Debt Cycle Trap
Sovereign debt pressure is the silent driver. The US Treasury’s quarterly refunding announcement on November 13 revealed a larger-than-expected reliance on short-term bills. This has spiked front-end yields but flattened the curve, a traditional precursor to dollar weakness. In contrast, the Eurozone’s fiscal stability pact revisions have provided a floor for the euro. Large sovereign wealth funds in the Middle East have been observed rotating out of USD-denominated credit into European equities, specifically targeting the DAX and CAC 40. This capital flow requires the purchase of euros, providing a fundamental bid that technical patterns are only now reflecting.
The next major hurdle for this rally sits at the 1.0950 psychological level. Watch for the December 4 ECB policy meeting minutes. If the Governing Council hints at a ‘hawkish hold’ while the US data continues to soften, the 1.1240 target becomes the baseline for Q1 2026. Keep eyes on the December 12 US Core PCE release for the final confirmation of the dollar’s structural peak.
