The European Central Bank's optimism on the economic outlook and weakness in the safe-haven dollar, as the U.S. economy rebounds, provide underlying support for further EUR/USD gains.
There were few surprises from the ECB at Thursday's meeting and the hawks remained quiet nL8N2MF64Y. But the central bank predicted a strong economic rebound in 2021, with President Christine Lagarde saying "There are clearly signs of improvement" nL1N2MF0DA.
While the coronavirus remains a wild card, euro zone consumer confidence improved in April nS8N2FN04S, and there is certainly light at the end of the tunnel, providing underlying EUR support.
The USD bounced on Thursday after reports President Joe Biden is proposing a historic increase in capital gains taxes nL1N2MF2B1.
In the bigger picture the dollar is trending lower however, as the robust U.S. recovery gathers pace, encouraging investors to seek riskier assets.
Technically the picture is also positive for EUR/USD, as 5, 10 and 21 daily moving averages head higher with 21-day Bollinger bands, which is a strong trending setup.
EUR/USD has stalled around 1.2050, but as long as the gently rising 1.1925 200 DMA holds, the bias remains higher.
The 10 DMA has been a base this week and is now initial support at 1.1992.
The target is a test of the 1.2243 February high, with initial resistance at 1.2102, 61.8% of the 2021 fall.
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