EUR/USD spot prices are now just above the 1.1635 level. Traders are staying tuned as the market environment has seen almost no movement for the past day. The exchange rate dropped below the important 50-day Simple Moving Average (SMA). This level serves as the key capitulation trap, snuffing out all bullish momentum like a damp blanket. As the Asian trading session opens up on Friday. Through all of this, the EUR/USD pair trades in a tight range, capping further recent spectacular advances.
As shown below, on Thursday EUR/USD played around with the over two-week high level in what appears to be a bullish behavior that has got many traders’ heads turning. Bulls would do well to remain patient and observant. They would require to witness a clear break above the 50-day SMA before expecting any more upside. The heat map shows that EUR/USD is doing great against the USD with 0.68% increase. Moreover, it has increased by 0.65% against the GBP.
Traders are aggressively pricing in a 50% chance that the US central bank cuts borrowing costs in December. However, speculation is playing a huge role to define the current currency pair’s dynamics. As economic indicators and central bank communications have shifted, expectations are moving in light speed. The vast majority of economists think that the European Central Bank (ECB) will hold its deposit rate constant for the remainder of this year. This decision exemplifies a cautious monetary policy as they continue to address the economic uncertainties.
Currently, economists expect the ECB deposit rate will be held steady through the end of next year. That means European monetary policy is doomed to remain overly hawkish in the short run. Such backdrop should deliver a more favorable environment for the EUR/USD cross, which in turn, could deliver a positive third-party tailwind for further appreciation.
Traders are eager to see how the market plays out. They are particularly interested in developments with the potential to influence the euro’s performance against the dollar. Analysts suggest that breaking through the 50-day SMA could pave the way for sustained upward movement, reinforcing the overall positive sentiment surrounding the EUR/USD exchange rate.