Title : EUR/USD: Bulls remain in control above 1.0400

November 25, 2022 04:06 AM ET

By:AnalysisWatch

The buying pressure on the single currency remains well anchored, which motivates EUR/USD to extend the uptrend beyond the 1.0400 level with some conviction.

EUR/USD: Has the outlook shifted to the upside?

On Friday, EUR/USD gained for the fourth consecutive session, attempting to consolidate the recent breakout above the 1.0400 level and the important 200-day SMA.

In terms of the 200-day line, it should be noted that the pair has been trading below the 200-day line since mid-June 2021. A close above this key region (November 24) should turn the pair's outlook in a constructive direction, allowing for additional short-term gains.

The improved sentiment in the risk complex is accompanied by the rise in the spot rate, while the promising results of the German calendar also contribute to the optimism around the currency.

The final GDP figures show that the German economy grew by 1.3% in the July-September period and by 0.4% quarter-on-quarter. In addition, consumer confidence, as measured by GfK, improved slightly to -40.2 in December.

The EUR/USD currency pair remains firm, holding above the 1.0400 hurdle despite some recovery in the dollar and changing trends in risk appetite.

Meanwhile, the European currency is expected to closely monitor dollar dynamics, geopolitical concerns, and the divergence between the Fed and the ECB. Moreover, the markets' reassessment of a possible turnaround in Fed policy remains the sole driver of the pair's price action for the time being.

Returning to the euro area, increasing speculation about a possible recession in the region, supported by fading sentiment indicators as well as the start of a weakening in some fundamentals, is proving to be an important domestic headwind for the euro in the near term.

ECB Hike Cycle Extension vs. Rising Recession Risks impact of the war in Ukraine and ongoing energy shortages on the region's growth outlook and inflation prospects. risks of inflation becoming entrenched.