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  • EUR/USD continues to capitalize on broad selling pressure surrounding USD.
  • Positive risk sentiment allows EUR to preserve its strength.
  • Thursday’s ECB meeting will be the next significant catalyst for the shared currency.

The EUR/USD pair extended its rally into a seventh straight day on Tuesday as the risk-sensitive EUR continued to outperform the USD in the risk-on market environment. After touching its highest level since mid-March at 1.1196, however, the pair has gone into a consolidation phase and was last seen gaining 0.3% on the day at 1.1168.

The lack of significant macroeconomic data releases allowed the risk-sentiment to impact the pair’s movements. Germany’s DAX 30 Index surged to its best level in three months and gained 3.75% on Tuesday and the Euro Stoxx 50 rose 2.4% to reflect the upbeat market mood.

Ongoing USD selloff lifts EUR/USD

On the other hand, the greenback weakened against its major rivals with the US Dollar Index slumping to its lowest level in 12 weeks at 97.43. Although the index recovered modestly in the late American session, it looks to close the day in the red near 97.70.

On Wednesday, Unemployment Rate data from the euro area will be looked upon for fresh impetus. Later in the day, the ADP Employment Change and the ISM Non-Manufacturing PMI data will be featured in the US economic docket.

More importantly, the European Central Bank (ECB) will announce its monetary policy decisions on Thursday. Previewing the ECB meeting, “the most likely scenario is that the bank tops up the pandemic emergency purchase programme (PEPP) to a total of €1 trillion,” noted FXStreet analyst Yohay Elam. “In this case, which has a high probability, EUR/USD would advance but probably remain within known ranges.”

Technical levels to watch for