The EUR/USD pair showed some bullish activity during the Asian session on Friday, breaking a two-day slump as it approached the monthly low, hovering around the horizontal support at 1.1550-1.1540. Still, there’s a lack of strong bullish momentum, with the market currently trading near 1.1575, reflecting a slight increase of less than 0.10% for the day.
Meanwhile, the US dollar maintained the significant gains it achieved over the last couple of days, reaching a peak not seen since early August on Thursday. This has been a driving force behind the EUR/USD pair’s movements. Given the Federal Reserve’s recently hawkish stance, it seems increasingly unlikely that we’ll see a significant softening of the dollar. Fed Chairman Jerome Powell has dismissed market speculations about another rate cut coming in December, suggesting that an increase in safe-haven demand might curb any steep declines for the dollar.
On the other side of the Atlantic, the European Central Bank (ECB) opted to keep its key deposit facility rate steady at 2% for the third consecutive meeting. They noted that inflation is still close to their medium-term goal of 2%, but they also highlighted the uncertainty surrounding the eurozone’s economic outlook, largely due to global trade tensions and geopolitical issues. There seems to be a split among policymakers regarding future rate cuts, which might keep traders from making bold bullish moves on the euro (EUR), potentially limiting the EUR/USD pair’s upward potential.
Because of this uncertainty, it might be prudent to hold off on making any aggressive moves until there’s stronger buying momentum. Conversely, if the market dips significantly below the critical support level of 1.1550-1.1540, it could signal for bearish traders to step in, possibly leading to even greater losses. Overall, the EUR/USD pair seems on track to face losses for the second week running, remaining sensitive to fluctuations in the USD. Moving forward, statements from key members of the FOMC may bring fresh insights later this Friday.
