EUR/USD picked up fresh momentum at the start of the week, reclaiming the 1.1600 handle during Monday’s Asian session. The pair is now testing the 200-day Simple Moving Average (SMA), a key technical barrier that traders are watching closely before committing to further bullish positions. The broader bias remains constructive as persistent US Dollar (USD) weakness continues to underpin the pair.
The USD Index (DXY) is pinned near a two-week low as markets price in rising odds of another Federal Reserve (Fed) rate cut in December.
Dovish commentary from multiple Fed officials last week boosted expectations that the central bank will ease policy again, while improving risk sentiment in global markets keeps the Greenback on the defensive. This environment remains supportive for EUR/USD.
Market drivers
The euro is additionally supported by the growing consensus that the European Central Bank (ECB) has ended its rate-cut cycle. Minutes from last week’s ECB meeting showed unanimous agreement to leave all three key rates unchanged, with policymakers noting that the current stance is “in a good place.” Markets have now largely priced out any further rate cuts in 2025 and assign only about a 40% probability of easing by the end of 2026.
This reinforces the euro’s resilience and strengthens the case for further upside in EUR/USD. A decisive move above the 200-day SMA would validate the bullish technical setup and open the door for an extension of the one-week-long uptrend.
Looking ahead, traders will focus on a packed US data calendar, beginning with today’s ISM Manufacturing PMI. Additionally, final Eurozone PMI readings may offer near-term catalysts for the pair as the week begins.
