EUR/USD Forecast: Sustained break below 1.1900 mark should pave the way for further losses

The EUR/USD pair maintained its offered tone on the last trading day of the week and refreshed YTD lows amid the prevalent bullish sentiment surrounding the US dollar. The optimistic US economic outlook continued underpinning the greenback, which got an additional boost from the previous day's Powell-inspired upsurge in the US Treasury bond yields. The Fed Chair Jerome Powell on Thursday largely dismissed concerns about the recent sharp rise in long-term yields and disappointed investors anticipating immediate action.

The USD buying picked up pace in reaction to the upbeat US monthly jobs report, which showed that the economy added 379K new jobs in February. Adding to this, the previous month's reading was also revised higher to 166K from 49K reported earlier and the unemployment rate unexpectedly edged lower to 6.2% from 6.3% previous. The data reinforced the narrative of strong sequential recovery, which, in turn, pushed the yield on the benchmark 10-year US government bond back above 1.60%, or fresh over one-year tops, and further benefitted the greenback.

However, a strong rally in the US equity markets kept a lid on any further gains for the safe-haven USD and helped limit any further losses for the major. Nevertheless, the pair settled near the lower end of its weekly trading range and remained depressed through the Asian session on Monday. The USD found some support on the first day of the week amid reports of attacks on Saudi Arabian oil production facilities and the passage of a much-awaited $1.9 trillion pandemic aid package proposed by US President Joe Biden.

The US Senate on Saturday voted 50-49 in favour of the bi11, with some changes related to the increase in the minimum wage and the number of people who will qualify for a $1,400 stimulus payment. The legislation now moves back to the House for a vote on Tuesday. The fact that the total US fiscal support is much greater than the EU recovery fund. This, along with the widening of yields between the US 10-year Treasuries and German Bund yields supports prospects for an extension of the ongoing downward trajectory for the pair.

Market participants now look forward to the release of the German Industrial Production and the Eurozone Sentix Investor Confidence for some short-term trading impetus. There isn't any major market-moving economic data due for release from the US on Monday. Hence, the US bond yields and the broader market risk sentiment will play a key role in influencing the USD price dynamics. This, in turn, should allow traders to grab some short-term opportunities as the focus now shifts to the European Central Bank meeting on Thursday.

Short-term technical outlook

From a technical perspective, the pair, for now, seems to have found some support near the 61.8% Fibonacci level of 1.1603-1.2350 strong move up. A sustained break below will be seen as a fresh trigger for bearish traders and set the stage for an extension of the recent sharp retracement slide from near three-year tops touched in January. The pair might then accelerate the slide towards mid-1.1800 region before eventually breaking below the 1.1800 mark and test the next major support near the 1.1740-35 region.

On the flip side, attempted recovery moves might now confront stiff resistance near the previous YTD lows, around the 1.1955-60 region. This coincides with the 50% Fibo. level, which if cleared decisively might trigger a short-covering move towards the key 1.2000 psychological mark. Any further positive move might be seen as a selling opportunity and runs the risk of fizzling out rather quickly ahead of the 38.2% Fibo. level, around the 1.2055-60 region.