- ECB is expected to discuss a QE exit strategy at its next meeting.
- EUR/USD rises above 1.18 for the first time since mid-May on Thursday.
- A lack of macroeconomic data releases keeps the DXY near its recent lows.
The EUR/USD pair was able to build on its recent rally on Thursday as investors continue to price the expectations of a QE exit announcement next week. After touching its highest level in nearly three weeks at 1.1840, the pair has gone into a consolidation phase in the NA session and was last seen trading at 1.1820, where it was up 0.4% on a daily basis.
Following market reports and comments from the ECB officials suggesting that the QE could come to an end by the end of this year, the shared currency started to gain strength against its rivals. Commenting on the shifting in the market perception, “growing market expectations of an end to the bond purchasing program have occurred at the same time that inflation expectations in the eurozone have been improving, and it appears that senior members of the Governing Council are comfortable that the fall off in economic momentum at the beginning of the year won’t continue,” ANZ analysts stated and elaborated further:
“Nonetheless, it is possible that nothing will materialise out of next week’s discussions; the ECB may wish to retain a cautious approach in light of downside risks, especially relating to recent political events.”
Earlier today, the data from Europe showed that the real-GDP growth in the first quarter came in line with experts’ estimate with 0.4% and 2.5% on a quarterly and yearly basis respectively. On the other hand, the only data from the U.S. revealed that weekly initial jobless claims stayed virtually unchanged at 222K.
A lack of fundamental developments that could help the greenback regain its traction, the US Dollar Index plummeted to 93.20. Moreover, the 10-year T-bond yield failed to reach the critical 3% mark and turned negative on the day to make it even more difficult for the buck to find demand.
Technical outlook
The pair could encounter the first technical support at 1.1720 (20-DMA) ahead of 1.1650 (Jun. 5 low) and 1.1520 (May 30 low). On the upside, 1.1940 /May 15 high) now aligns as the next target ahead of 1.2000 (psychological level) and 1.2040 (200-DMA).
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