EUR/USD Analysis:
- Safe haven appeal of the dollar hurts Euro[1], will the ECB remain ultra-dovish after ECB meeting?
- Dollar extends EUR/USD[2] decline, analyzing a break or bounce at long-term trendline support
- Contrarian IG Client Sentiment[3] indicator undecided for now
Relatively Dovish ECB and US Dollar Safe Haven Appeal Send EUR/USD Lower
The US dollar[4] rose against its peers in early trade in the London session and in particular, in the EUR/USD[5]. Markets have communicated doubts about the speed of the economic recovery as the Eurozone witnessed a contraction in GDP[6] over the last two successive quarters.
Source: Tradingeconomics
The recent changes to the ECB[7]’s inflation target of 2%, with overshoots allowed, further entrenches the ultra-dovish nature of the ECB. This comes at a time when members of other central banks – mainly the Fed and BoE - have already brought up the topic of tapering in some way or another, which stokes expectations of future interest rate increases in those locations. However, the ECB remains committed to creating a supportive environment to aid the recovery of the economic zone and warns against tightening too soon.
For all market-moving data releases and events see the DailyFX Economic Calendar[8]
Long-Term Trendline Support in-Focus
The daily chart shows recent price action as it temporarily broke below the long-term trendline[9] acting as support since November 2020.
Bears will be eyeing at a break and hold below the long and short-term trendlines as the area of confluence represents a credible zone of support[10]. Levels of support are at the April low (1.1700) and then around the 50% Fib level (drawn from the
