Dovish ECB and Strong USD : What Lies Ahead for the EUR/USD?

Last week, the EUR/USD pair began trading under pressure, but over the course of the week, the pair moved in sideways.

At the moment, buyers have been slightly recovering from the recent declines, but there are signs emerging that the price may once again be exposed to selling pressure.

Upon analyzing the EUR/USD pair's chart, we can see that the price is forming an upward channel that could signal a new downward momentum if sellers regain control of the price and if the lower limit of the channel is breached.

EUR/USD 1 hour time frame chart. Source: xStation 5

Furthermore, looking at the U.S. dollar index, we observe that the technical target of the inverted head and shoulders pattern has not yet been reached, suggesting that the bullish scenario regarding the USD remains a possibility.

USD index. 4 hours time frame chart. Source: xStation 5

This week, we will have the ECB decision, and although no changes in interest rates are expected, Lagarde's conference could bring periods of increased volatility. It's important to note that the ECB has maintained a dovish stance, and the euro has been penalized as a result.

Henrique Tomé,
Analyst Portugal