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EUR/USD pressured amid strong dollar, ECB risk

EUR/USD remained pressured on Tuesday as the dollar continued to strengthen on generally positive US economic data and the euro fell against several of its rivals ahead of Thursday’s much-anticipated rate decision and press conference by the European Central Bank (ECB).

Although the ECB is not expected to make any major changes in monetary policy at this time, potentially following the Bank of England’s lead in its decision to defer any new easing this month, the central bank is widely expected to implement new post-Brexit stimulus measures later in the year. Any hints on Thursday as to when this might happen or what form these measures might take should make a significant impact on the euro. As always, a statement that is seen as more dovish than expected should lead to further pressure on the euro, especially if additional monetary easing is seen to be imminent from the ECB’s statement and press conference.

Meanwhile, the US dollar has generally been well-supported as of late due to a series of generally positive US economic data released in the past few weeks that has helped to revive the possibility of at least one Fed rate hike this year in the fading shadow of June’s Brexit outcome.

With the euro potentially pressured further by a dovish ECB and the US dollar remaining supported by positive economic data and renewed Fed expectations, EUR/USD could have significantly further to fall from its current trading range.

The Brexit-driven plunge that occurred in late June led to a swift breakdown below the lower border of a major uptrend channel extending back to last December’s 1.0500-area lows. After the channel breakdown, the currency pair has not been able to recover, trading in a relatively tight range just off its post-Brexit lows and below its 50-day moving average. With any sustained breakdown below the 1.1000 psychological area, further pressure on EUR/USD could prompt a move down towards the key 1.0800 and then 1.0500 support targets.

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