EUR/USD Continues Uptrend
The EUR/USD pair has gained momentum for the fourth consecutive day, crossing the 1.1600 mark during the Asian trading session on Thursday, and achieving a high not seen in a week and a half. This rise appears to be driven by a selling trend in the US dollar, pushing the pair closer to a significant resistance level marked by the 200-day simple moving average (SMA).
On another note, the US dollar index (DXY) has dropped to its lowest point in over a week. This decline reflects the dollar’s performance across various currencies and is influenced by dovish expectations from the Federal Reserve. Currently, traders are estimating about an 85% probability that the Fed will lower interest rates again in December, fueled by recent comments from Fed officials. Mixed economic data released this week hasn’t significantly altered these expectations, suggesting that the market’s optimistic outlook has weakened the safe-haven dollar. Consequently, this has benefited the EUR/USD pair.
Additionally, support for the euro has emerged from the European Central Bank’s (ECB) cautious approach to monetary policy. ECB Vice President Luis Deguindos expressed a somewhat optimistic view about growth on Wednesday, confirming that existing interest rates are appropriate. Furthermore, Croatian Central Bank Governor Boris Vujicic indicated that the ECB should only consider cutting rates again if inflation fails to improve and remains below the target. ECB Chief Economist Philip Lane mentioned that a slowdown in non-energy inflation is necessary to maintain overall price growth close to the 2% target.
Looking ahead, many economists expect the ECB to keep deposit rates steady for the remainder of the year, with no adjustments anticipated through the end of next year. This perspective seems to favor euro bulls, suggesting that the path for the EUR/USD pair is inclined upward. However, it might be wise to wait for consistent strength above the 200-day SMA, currently around the 1.1625 level, before making any further moves. Additionally, bullish traders should proceed with caution, especially since trading volume is relatively low, likely due to the US Thanksgiving holiday.
