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  • EUR/USD extended its slide below 1.1800 on Tuesday.
  • US Dollar Index is rising for the sixth straight day.
  • Investors remain focused on ECB’s policy meeting on Thursday.

After moving in a relatively tight range above 1.1800 during the first half of the day, the EUR/USD pair came under renewed pressure in the early American session and touched its lowest level in 12 days at 1.1766. With the trading action turning subdued in the last hours, the pair seems to have gone into a consolidation phase around 1.1790, down 0.2% on the day.

Focus shifts to ECB meeting

Earlier in the day, the data published by the Eurostat showed that the euro area economy contracted by 14.7% on a yearly basis in the second quarter. Although this reading came in slightly better than the advanced estimate for a GDP decline of 15%, it failed to help the shared currency find demand. Other data revealed that the Employment Change in the second quarter was -3.1%.

On the other hand, the risk-averse market environment amid Brexit concerns and heightened US-China tensions provided a boost to the greenback on Tuesday. The US Dollar Index, which closed the previous five trading days in the positive territory, rose to 93.50 and was last seen gaining 0.3% on the day at 93.33.

On Thursday, the European Central Bank will announce its interest rate decision and release its policy statement.

Previewing this event and the potential impact on the EUR, “in the current environment, where EUR strength is much less justified by the economic backdrop than it was in 2017-18, we believe the ECB’s rhetoric on FX is likely to ramp up with further easing likely,” said HSBC analysts. “With markets preoccupied by the Fed’s policy framework shift to average inflation targeting, the risk of such a shift by the ECB has been completely ignored for now. As and when this happens, further strength in the EUR should be curtailed.”

Technical levels to watch for