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The EURUSD is looking increasingly bullish ahead of today’s European Central Bank, following an early-week rally towards the 1.2080 resistance level, marking the pairs highest trading level in early March this year.
Bullish news that the pace of the vaccine rollout was starting to speed up boosted the single currency and risk-on market sentiment. The prospect of the European economy coming out of lockdown in a few weeks also increased buying interest towards the euro and European stock markets.
Most economists are expecting the ECB will leave interest rates and monetary policy unchanged at today’s policy meeting. Last month the ECB increased the Pandemic Emergency Purchase Program, know as PEPP, in order to shore up the European economy at the height of the second lockdown.
Now that the eurozone economy is looking better, the ECB will be under pressure to discuss tapering. However, the ECB will be in no hurry to taper and are likely to talk down any prospects of changing monetary policy.
The European Central Banks actions last month helped bond yields turner lower, and the euro currency for a brief period. The ECB will be extremely cautious about tapering with both of the mentioned instruments on the rise.
The technical surrounding the EURUSD pair look particularly bullish while trading above the 1.1600 level. Additionally, the EURUSD pair recently recovered above its 200-day moving average after briefly dipping under this key technical metric.
Sentiment towards the EURUSD has been fluctuating wildly this week. The ActivTrader market sentiment tool went nearly 80 percent negative at the start of the week as the EURUSD pair rallied from 1.1980 to 1.2080.
Sentiment has now started to turn lower slightly, however, the majority of traders are still bearish, at 68% negative. Watch out for more losses as the sentiment skew remains in place.
EURUSD Short-Term Technical Analysis
The EURUSD pair has formed a head and shoulders pattern after falling back quite sharply from the 1.2080 resistance level. The bearish price pattern is activated while trading below the 1.2015 support level.
According to the overall size of the pattern the EURUSD pair could fall towards the 1.1930 to 1.1920 price region. EURUSD bulls may be lurking around this region if they expect that the pair can trade even higher over the coming weeks.
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EURUSD Medium-Term Technical Analysis
The daily time frame is showing that a head and shoulders pattern is unfolding. EURUSD bulls need to breach the 1.2330 area to invalidate this large and highly significant price pattern.
It should be noted that the trend on the daily time frame remain bullish while the EURUSD pair trades above the 1.1890, which is the location of its trend defining 200-day moving average.
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