EUR/USD Price Analysis: Acceptance above 50-SMA is critical to unleashing additional recovery

EUR/USD is posting small gains while consolidating in a tight range below 1.1600, as the US dollar rebound appears to have capped the upside.

The greenback tracks the US Treasury yields higher amid rising inflation and energy prices, strengthening the case for the Fed tapering. Meanwhile, the European Central Bank (ECB) said it is studying a new bond-buying plan for when the crisis tool ends.

The monetary policy divergence between the Fed and ECB will continue to undermine the euro and, therefore, any recovery attempt in the main currency pair could be only seen as temporary.

At the time of writing, EUR/USD is trading 0.07% higher on the day at 1.1573 amid holiday-thinned market conditions.

From a short-term technical perspective, the main currency pair is moving back and forth within a range, with the upside capped by the bearish 50-Simple Moving Average (SMA) at 1.1584 on the four-hour chart.

Meanwhile, the downside remains cushioned by the downward-sloping 21-SMA at 1.1562.

The Relative Strength Index (RSI) is edging higher but remains just beneath the midline, warranting caution for bullish traders.

EUR/USD: Daily chart

A sustained break below the 21-DMA will recall the sellers, exposing the yearly lows of 1.1529. Further south, the 1.1500 level will be put to test should the selling pressure intensify.

Alternatively, any meaningful recovery will initiate only on acceptance above the 50-SMA level. The bulls will target the October 4 highs of 1.1640 if the 1.1600 level gets cleared decisively.

EUR/USD: Additional levels to consider