The Euro-to-Dollar rate started the week at 1.18 testing a technical support level after the recent rally was impacted by several factors leaving the single currency depending on market appetite for the Dollar.

Euro-Dollar declined during four out of five days last week as risk aversion within global markets spurred Dollar demand and weighed on the Euro.

This was despite recent GDP figures being upwardly revised and the European Central Bank (ECB) lowering the amount of monthly government bond purchases within the Pandemic Emergency Purchase Programme.

Eurostat revised Q2 GDP growth to 2.2% from last week’s 2%, whilst the ECB hiked its eurozone GDP forecasts.

Furthermore, the ECB unveiled a reduction in quantitative easing for Q4, yet the Euro-Dollar rate declined from levels nearing 1.19 to test    1.18 on Monday.

“The overall policy stance of the ECB remains firmly on the dovish side and markets are reasonably reluctant to see this week’s move as the first step in a sustained policy normalisation path,” said Chris Turner, global head of markets and regional head of research for UK & CEE at ING.

“There are no clear data drivers in the Eurozone next week, and considering the very small fluctuations of EUR/USD around a major risk event like the ECB meeting, we could simply see the pair oscillate within its recent 1.1800/1.1900 trading range,” Turner added.

Meanwhile, the Dollar has edged up following two weeks of declines as investors focus on government reactions to Covid outbreaks across the world.

“Bullish price/rsi divergence and the rally back above the 50d SMA are signals that further downside might be hard to achieve. If the Euro begins to rally from support at 1.18 in the next week or two then a head and shoulders bottom may form. If this forms and the neckline at 1.1909 breaks, it will target 1.2095 and 1.2205,” according to Paul Ciana, chief technical strategist for currencies, commodities and bonds at BofA Global Research.

The Euro-Dollar rate appears to be stabilising since the end of last month, with Commerzbank analysts looking for it to bottom out above 1.1750 before attempting to reach the 1.20 mark.

“We still favour an eventual extension towards the 1.1990/1.2014 August 2020 high and 200-day ma” said Karen Jones, head of technical analysis for currencies, commodities and bonds at Commerzbank. “Dips lower are indicated to remain shallow and ideally will be contained by 1.1800/1.1790.”