EUR/USD has risen to its highest level since October 30, now trading around 1.1575 as the US Dollar weakens. After hitting a three-month low earlier this week, the currency pair is poised for a weekly gain following two weeks of losses. Charts indicate that EUR/USD has been within a descending parallel channel since September 17, peaking at 1.1918 in October. The recent rebound approaches the upper boundary near the 21-day SMA around 1.1590, which may signal new buying opportunities.

Possible Bullish Breakout

If EUR/USD breaks above this zone, we could see movement towards the 1.1665–1.1670 area, where the 50-day and 100-day SMAs meet. Sustained strength in this area could signal a bullish breakout, marking a shift in trend since September. There is immediate support at the weekly low of 1.1468, near the channel’s lower boundary. Indicators like RSI and MACD are showing signs of bullish momentum, indicating increasing buying pressure. The Euro, used in the Eurozone, represents 31% of global foreign exchange transactions, with a daily turnover of over $2.2 trillion. The European Central Bank (ECB) affects the Euro’s value through its interest rate decisions, which influence inflation control and economic growth. Economic indicators, such as GDP and inflation, play a crucial role in the Euro’s direction, with stronger economies typically benefiting the currency. Trade balances also impact the Euro’s value; a positive balance tends to strengthen the Euro.

Euro and US Dollar Dynamics

Currently, EUR/USD is testing a key resistance level around 1.1600, the ceiling of a descending channel that has persisted for weeks. Technical indicators like the RSI and MACD are turning favorable, suggesting that bullish momentum is building. We believe that closing decisively above this level could lead to a significant upward move. The weakness of the US Dollar is providing momentum, driven by uncertainty from the ongoing government shutdown and signs of an easing economy. Just this week, initial jobless claims for the week ending November 1st unexpectedly rose to 245,000, the highest in four months. This data supports the view of a weaker dollar in the near future. At the same time, the Euro is gaining strength due to ongoing inflationary pressures across the Eurozone. The latest flash estimate for Eurozone HICP is 2.8%, significantly above the ECB’s 2% target, prompting strong comments from several Governing Council members. This difference in monetary policy expectations makes the Euro more appealing. For those looking to trade this potential breakout, buying call options is a simple strategy. We are considering call options with strike prices just over 1.1600, around 1.1650, with expirations set for late November or December. This approach offers a defined-risk way to benefit from potential gains towards the 1.1670 region. A more cautious strategy would be a bull call spread to minimize upfront costs and manage risk. Traders currently with short positions should view this as a crucial warning sign and may want to consider hedging with calls or reducing short exposure until the direction is confirmed. This situation is reminiscent of a similar breakout we saw in late 2023. At that time, a sustained move above a key moving average following a lengthy downtrend triggered a sharp, multi-week rally. History shows that once these technical levels break, the follow-through can happen quickly. Create your live VT Markets account and start trading now.

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