- EUR/USD hits multi-week highs above the 200-day SMA in Asia.
- Further gains may remain elusive ahead of the next week's ECB rate decision.
- ECB's policymakers, on Wednesday, said the bank stands to ready to do more if required.
EUR/USD is gaining altitude with the American dollar losing ground amid sustained risk-on in the Asian shares and American stock futures.
At press time, the currency pair is trading around the 200-day simple moving average at 1.1010, having put in a high of 1.1035 during the Asian trading hours. That was the highest level since April 1.
Bulls eye a close above 1.1019
The pair has been restricted to a range of 1.1019 to 1.0727 since mid-April. Hence, some analysts think a close above the upper end of the trading range is needed to strengthen the bull grip around the pair.
"Only a close above 1.1019 would mark a more significant base and important turn higher, with resistance next at 1.1065, then 1.1145/66 – the late March high and 61.8%retracement of the March collapse – which we would expect to cap at first,” Credit Suisse analysts noted.
Limited scope for a rally ahead of next week's ECB
While EUR/USD has crossed above 1.10, big gains may remain elusive due to dovish comments made by the European Central Bank members in the past 24 hours.
The central bank's chief Christine Lagarde said on Wednesday that the “mild scenario is out of date” and the economy is likely between the central bank’s “medium to severe scenarios”, which means the gross domestic product (GDP) could contract by 8% to 12% this year.
Meanwhile, ECB's Schnabel said that the bank is ready to expand tools to achieve its mandate, and De Guindos, also an ECB member, said that the central bank is totally open to recalibrating their stimulus program. Further, ECB's chief economist Lane said that the economic shock requires expansionary fiscal and monetary policies.
With a number of officials suggesting that more easing could be on the way, the EUR/USD bulls are likely to refrain from making aggressive bets on the single currency ahead of the next week's ECB rate decision.
"Currently, euro is riding on the coattails of an expanded recovery fund that would combine the German-French proposal with the proposals of the “frugal four” including Austria, Denmark, Sweden, and the Netherlands. Investors are focused on the upside but further gains should be limited ahead of the European Central Bank’s monetary policy announcement next week."
As for Thursday, the pair is likely to take cues from the broader market sentiment (currently risk-on) ahead of the preliminary data for Germany's Consumer Price Index for May scheduled for release at 12:00 GMT. After that, the focus would shift to the US Durable Goods Orders and the weekly Initial Jobless Claims report, due at 12:30 GMT.