The EUR/USD pair is rising for the sixth day in a row on Wednesday as the greenback continues to face selling pressure while investors gear up for Thursday’s European Central Bank interest rate decision.
At the time of writing, the EUR/USD pair is trading at the 1.0060 zone, 1% above its opening price. The euro reached its highest level in six weeks against the greenback at 1.0080.
On Thursday, the ECB will decide on monetary policy. Expectations remain hawkish as the WIRP tool suggests a 75 bps hike is completely priced in. Meanwhile, the swaps markets are betting on another 75 bps increase in December and a 50 bps increase at February’s meeting.
Investors will watch President Christine Lagarde’s press conference, especially on economic assessments and forward guidance. At the last meeting, Lagarde stated that she only knew the terminal rates were “far away” from current levels but that the next decision would depend on incoming data.
Meanwhile, investors bet the FOMC will almost certainly hike by 75 bps on Nov. 2. Still, swaps markets are building a stronger case for a 50 bps hike for the Dec. 15 meeting, while a week ago, the probability was only 20%.
Against this backdrop, the greenback has begun losing interest, with the DXY already down 1.8% this week. At the time of writing, the DXY is trading at the 109.80 area, its lowest level in five weeks. U.S. Q3 GDP data will also be on the docket on Thursday.
From a technical perspective, the EUR/USD short-term outlook has turned more constructive as indicators gain ground on the daily chart and the price has broken out above a descending trendline drawn from February highs.
However, the chart suggests that the pair could stage a technical correction before the next leg higher as the RSI is swiftly approaching overbought levels.
On the upside, the next resistances are seen at the 100-day SMA, 1.0092, and the 1.0100 level, ahead of the September monthly high of 1.0197. On the other hand, support levels could be faced at parity and the 0.9900 zone, ahead of the 20-day SMA currently at 0.9823.