The EUR\/USD pair gains momentum after experiencing a pullback from its recent peak, aided by the divergent monetary policy outlooks of the Federal Reserve (Fed) and the European Central Bank (ECB). The pair trades around the mid-1.1600s, aiming for a second consecutive week of gains. <\/p>\n
Despite positive US labour market data, the US Dollar struggles due to expectations of a dovish stance by the Fed, which could lead to a rate cut. This is in contrast to the ECB’s stability in interest rates, supported by expectations of inflation near 2%, bolstering the euro.<\/p>\n
Technically, the EUR\/USD pair’s recent gains confirm a positive outlook as it moves above the 100-day Simple Moving Average (SMA). Traders await the US Personal Consumption Expenditure (PCE) Price Index release, which may influence the Fed’s future rate decisions.<\/p>\n
Data shows the US Dollar declined 0.50% against the Euro in the last seven days, with the largest drop of 1.30% against the Australian Dollar. Conversely, the Swiss Franc was the US Dollar’s strongest performer. This currency movement reflects various economic and policy factors influencing foreign exchange markets.<\/p>\n
The divergent policy outlooks between the Federal Reserve and the European Central Bank suggest a continued tailwind for EUR\/USD. With markets pricing in an 85% chance of a Fed rate cut next week, we believe derivative traders should consider positions that benefit from further dollar weakness. Recent US Core CPI data for November coming in at 2.8% has only reinforced this dovish Fed expectation.<\/p>\n
The immediate focus is the US PCE Price Index being released later today, which will be a critical driver of near-term volatility. A softer-than-expected number would likely cement the case for a rate cut and could push EUR\/USD toward the 1.1700 level. This is a pattern we saw in late 2023, where falling inflation data rapidly accelerated market expectations for Fed easing.<\/p>\n
From a technical standpoint, the recent breakout above the 100-day Simple Moving Average, now a support level around 1.1580, provides a solid floor for bullish strategies. We see this as an opportunity to purchase call options with strike prices above 1.1700 or to use bull call spreads to limit costs. The successful defense of this moving average level following the recent pullback confirms buying interest.<\/p>\n
Given the expected price swings following the PCE release, traders anticipating a significant move but unsure of the direction could look at straddle or strangle options strategies. Implied volatility for one-week EUR\/USD options has already climbed to 9.2%, up from a monthly average of 7.5%, indicating the market is bracing for a sharp move. This makes buying volatility an attractive short-term play.<\/p>\n
On the other side of the pair, the euro continues to find support as the ECB appears to be finished with its rate-cutting cycle. November\u2019s Eurozone HICP inflation was confirmed at a stable 2.1%, giving the ECB justification to hold policy steady. This fundamental divergence supports our view that the path of least resistance for EUR\/USD in the coming weeks is to the upside.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD rises amid diverging Fed-ECB policies, supported by technical strength and softening US Dollar outlook.<\/p>\n","protected":false},"author":5,"featured_media":16962,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-36085","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts\/36085","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/comments?post=36085"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/posts\/36085\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/media\/16962"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/media?parent=36085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/categories?post=36085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/sv-eu\/wp-json\/wp\/v2\/tags?post=36085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}