EUR/USD Extends Gains Due To Weakening Dollar

EUR/USD Extends Gains Due To Weakening Dollar

Day traders making EUR/USD their foreign exchange pair choice have reason to rejoice, with bulls pushing higher after minutes from an FOMC (Federal Open Market Committee) meeting revealed the intention of the Federal Reserve to decelerate the rate hike pace.

The FOMC is responsible for determining the course of monetary policy in the United States, and the board of governors is made up of a combination of seven main members and five presidents of reserve banks.

While recession risks and monetary policy are the primary drivers in the decision, a move over 1.0350 suggests the pair will continue to rise.

Dollar Pressures

Falling yields and a weakening dollar continue to support the appreciation of the Euro, and the absence of US liquidity has led to lower trade volumes. This could help contribute towards larger price moves than previously expected.

The major currency pair is on track for the second month of gains. Additional purchasing pressure has placed price action in a significant area of technical resistance, as the pair rebounds from a low in September.

A break of prior trending resistance drove EUR/USD above parity (1.000), and the move accelerated at the beginning of November, where prices were driven to another key zone of 1.035 – something not seen since 2017.

Forward Picture

Following an attempt last week to break 1.045, an upper wick rejection and weekly close in the region of 1.032 highlighted the zone’s importance. While daily timeframes showcase the pair’s determination to rise to 1.046, this month’s high offers additional resistance at 1.048, with a higher move opening the door for a 50-week moving average of 1.057.

However, event risk could pick up again next week. This means that depreciation of the Euro and/or renewed strength of the US dollar could drive EUR/USD back towards its weekly opening point of 1.032 – and this could even cause a dip towards the weekly low of 1.022.