The dollar could derive support from the upcoming ECB meeting
The dollar index exceeded the 93.00 mark early on Wednesday and was targeting fresh three-month peaks near 93.20 before paring some gains as risk sentiment continued to improve in recent trading. Despite the local retreat, the greenback remains on the offensive and could see more gains in the coming days.
Global financial markets proceeded to recovery following an aggressive and widespread sell-off witnessed at the start of the week. Worries about the ongoing pandemic and its impact on the economic recovery have receded somehow, but investors remain cautious amid rising virus cases in some parts of the world. In other words, risk aversion could reemerge at any point, so the upside potential in stock markets would be limited in the short term.
Furthermore, the dollar could derive support from the upcoming ECB meeting due on Thursday. The central bank may put the common currency under extra selling pressure if monetary authorities strike a dovish tone on the economy and monetary policy. The key message could be that there is no rush to signal a tighter policy. In this scenario, the greenback could add to recent gains through a weaker euro. In general, one should not expect new policy signals coming from the change in the central bank’s language.
Earlier today, EURUSD dipped to fresh April lows around 1.1750 before erasing losses in recent trading. Still, the euro lacks the recovery momentum to challenge the 1.1800 figure that represents the immediate resistance now. It looks like the pair could stay on the defensive ahead of the ECB meeting. In a bearish scenario, the euro may derail the mentioned lows to challenge the 1.1700 figure for the first time since November.