The EUR/USD pair is gaining momentum for the second consecutive day, trading near 1.1265 during the Asian session on Thursday. This uptick comes as the US Dollar weakens, reaching its lowest point since late September. The decline in the USD is attributed to concerns over fiscal gridlock following a Democratic sweep in the US midterm elections, which could slow economic growth. Additionally, hopes for an end to the Iran war have reduced crude oil prices, easing inflation fears and lowering US bond yields. These factors are overshadowing expectations of a Federal Reserve rate hike, further weakening the USD and supporting the EUR/USD pair.
Meanwhile, data released on Wednesday showed that Eurozone annual headline inflation rose to 4.0% in October, the highest in three years. This has increased bets for a 25-basis-point interest rate hike by the European Central Bank in December, providing additional support to the Euro. However, concerns about France’s rising debt levels and political gridlock may limit aggressive bullish bets on the Euro, capping further gains for the EUR/USD pair.
From a technical standpoint, the EUR/USD pair is trading above the 200-period Simple Moving Average on the 4-hour chart. Bulls are awaiting a breakout above the 1.1270 resistance level, which marks the top boundary of a one-month-old range. Momentum indicators suggest a constructive near-term bias, with the Relative Strength Index hovering in bullish territory and the MACD line remaining positive. However, failure to break through the 1.1270 barrier could signal fading bullish momentum, potentially dragging the pair below 1.1200. A decisive break below this level could expose the lower end of the trading range around 1.1120-1.1110, setting the stage for a further downtrend.