EUR/USD Breaks Above 1.1600 as Dollar Faces Headwinds, Eyes 200-Day Moving Average Resistance

The EUR/USD currency pair continues its rally for a fourth straight session, penetrating the 1.1600 level and testing its highest price in over ten days during Asian trading on Thursday. The upward movement is primarily fueled by broad-based weakness in the US Dollar, with the pair now approaching the critical 200-day moving average barrier positioned near 1.1625, a technically significant resistance zone that traders are closely monitoring.

What’s Driving the Dollar Lower?

The USD Index (DXY), which measures the Greenback’s strength against major currencies, has retreated to its weakest point in more than one week. This decline reflects shifting market expectations around Federal Reserve policy. Market participants are now assigning roughly an 85% probability that the Fed will implement another rate cut in December, based on recent commentary from multiple central bank officials. Economic data released throughout the week—presenting a mixed picture—has done little to shift this outlook, leaving the safe-haven dollar vulnerable to continued selling pressure.

Eurozone Policy Remains Supportive

On the other side of the pair, the Euro benefits from the European Central Bank’s measured stance. ECB officials have signaled that current interest rates are appropriately calibrated, with emphasis placed on maintaining price growth near the 2% target level. Most economic forecasts point to an ECB that will maintain its deposit rate throughout the remainder of this year and beyond, providing underlying support for EUR bulls and suggesting the technical path of least resistance remains upward.

Technical Setup and Trading Considerations

The 200-day moving average represents the immediate technical battleground, with sustained moves above this level required before traders should commit to additional long positions. The recent momentum is partially attributed to elevated market sentiment and lower risk aversion, but traders should note that thin liquidity conditions persist due to the US Thanksgiving holiday, warranting caution for those seeking aggressive bullish exposure.

Currency Performance Snapshot

The data reveals that the Dollar has weakened most significantly against commodity-linked currencies and the Euro, reinforcing the thesis of broad USD selling pressure as the primary driver of current EUR/USD strength.