• EUR/USD staged a modest bounce on Wednesday amid some USD profit-taking.
  • A further recovery in the global risk sentiment weighed on the safe-haven USD.
  • Investors refrained from placing aggressive bets ahead of the ECB on Thursday.

The EUR/USD pair reversed an intraday dip to over three-and-half-month lows and finally settled with modest gains on Wednesday, snapping four consecutive days of the losing streak. Investors seemed to set aside fresh virus jitters, which was evident from a further recovery in the global risk sentiment. This, in turn, prompted some profit-taking around the safe-haven US dollar and provided a modest lift to the major.

The risk-on impulse in the markets triggered a strong follow-through positive move in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond briefly crossed above 1.3% and helped limit deeper losses for the greenback. Apart from this, investors' reluctance to place any aggressive bets ahead of the European Central Bank meeting on Thursday kept a lid on any strong gains for the pair.

The ECB adjusted the inflation target to a symmetric 2% at the conclusion of the strategy review earlier this month. Moreover, ECB President Christine Lagarde hinted at a change to the central bank's guidance last week, making this week's meeting very important. While the ECB is widely expected to keep its monetary policy settings unchanged, the market focus will be on any significant changes in the forward guidance.

Given the disagreement among members over the monetary policy outlook and the pandemic-related risk, market participants expect a dovish tilt in the statement. This should act as a headwind for the shared currency and force the pair to prolong its recent bearish trajectory. This will be followed by the post-meeting press conference, where comments by the ECB President Lagarde could further infuse some volatility around the euro crosses.

Short-term technical outlook

From a technical perspective, the pair, so far, has managed to defend a short-term ascending trend-line support extending from September 2020 swing lows, currently around mid-1.1700s. Given that technical indicators on the daily chart have recovered from the oversold territory, a sustained break below will set the stage for further weakness. The pair might then accelerate the fall towards YTD lows, around the 1.1700 mark touched in March. Some follow-through selling should pave the way for a slide towards the 1.1610-1.1600 horizontal support.

On the flip side, immediate resistance is pegged near the 1.1835-40 region and is followed by the 1.1875-80 supply zone and monthly tops, just ahead of the 1.1900 mark. A sustained strength beyond will negate the negative bias and prompt some short-covering move. This should allow bulls to aim back to reclaim the key 1.2000 psychological mark. The latter coincides with the very important 200-day SMA, which if cleared decisively will shift the near-term bias in favour of bullish traders.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays below 0.9800 after US inflation data

EUR/USD stays below 0.9800 after US inflation data

EUR/USD continues to trade in negative territory below 0.9800 in the American session on Friday. The data from the US showed that the annual PCE inflation declined to 6.2% in August but the stronger-than-expected core reading didn't allow the pair to gain traction.

EUR/USD News

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD fell to a fresh daily low below 1.1030 but managed to reverse its direction and climbed above 1.1100 during the American trading hours on Friday. The pair remains on track to snap a two-week losing streak despite having suffered heavy losses earlier in the week.

GBP/USD News

Gold extends daily rally beyond $1,670

Gold extends daily rally beyond $1,670

Gold preserved its bullish momentum and rose above $1,670 after the mixed inflation data from the US on Friday. The benchmark 10-year yield is down more than 2% as markets look to wrap up the third quarter, fueling XAU/USD's daily rally. 

Gold News

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shytoshi Kusama, the project lead for Shiba Inu, has dropped a teaser about Shiba Eternity games for the SHIB community. Proponents expect the launch of the collectible card game to be a bullish catalyst for Shiba Inu price. 

Read more

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

Equity markets remain at the precipice of a technical collapse, which we examine in the weekly long-term chart below. The overall picture remains one of nervousness ahead of the upcoming Q3 earnings season.

Read more

Majors

Cryptocurrencies

Signatures