Euro Breaks 1.16, US Dollar Under Increasing Pressure
The EUR/USD pair continued its strengthening for the fourth consecutive day and managed to climb above the 1.1600 level in the Asian session on Thursday, hitting a near one-and-a-half-week high. This rise was driven by sustained selling pressure on the US dollar, which gave the euro more room to strengthen. The pair is now approaching a key technical area, namely the 200-day Simple Moving Average (SMA) around 1.1625, which serves as the next key resistance.
From a fundamental perspective, the US dollar index (DXY) weakened to its lowest level in more than a week as markets increasingly believe the Federal Reserve will cut interest rates again at its December meeting. Market participants currently price in around an 85% chance of a rate cut, reinforced by dovish comments from several Fed officials and mixed US economic data. Risk-on sentiment in global markets has also reduced demand for the dollar as a safe-haven asset, thus providing a positive boost to EUR/USD's strength.
Conversely, the euro has found support from the European Central Bank's (ECB) cautious stance, which has not yet rushed into further interest rate cuts. ECB Vice President Luis de Guindos has stated that the current interest rate level is appropriate, while other officials, such as Boris Vujcic, believe further cuts are only worth considering if inflation has the potential to fall below target without rebounding. ECB Chief Economist Philip Lane also emphasized the need for a slowdown in non-energy inflation to maintain overall inflation near the 2% target. Expectations that the ECB will hold interest rates until next year make the euro relatively more attractive compared to the dollar.
Technically, the short-term trend for EUR/USD is currently bullish, but the market is still awaiting confirmation of a convincing breakout of the 200-day simple moving average (SMA) around 1.1625 before targeting further gains. Furthermore, trading liquidity tends to be thinner due to the Thanksgiving holiday in the US, so movements could be sharper but not necessarily reflect the direction of the larger trend. For market participants, the combination of a weakening dollar, a dovish Fed outlook, and the ECB's tendency to hold interest rates keeps the short-term bias for EUR/USD higher, but caution is still needed for a technical correction around this key resistance zone. (asd)
Source: Newsmaker.id
