After a downward trend, the euro bulls have regained their footing and resumed the trek towards 1.20 with the support of weakness in dollar. The greenback remained pinned near multi-week lows on falling US bond yields as traders rolled back aggressive expectations that the Federal Reserve will tighten its policy earlier than pledged. Also, the global pick up in vaccination and Biden's announcement that every adult will be eligible to be vaccinated calmed the traders keeping the dollar subdued. Even the news that the Europe is going to see accelerating vaccinations this quarter and half of the population will be vaccinated by June kept the euro elevated.
Despite that there are concerns that the recent advance in euro has already extended too far. Traders are sceptical whether the economic growth in the EU will pick up at the same rate as in other countries that have more advanced vaccination programs. This suspicion has led to some short-covering and 1.20 level remains an important barrier. But the real hurdle is of the European Central Bank decision, which is due later today.
In our view, the central bank will keep policy unchanged, emphasising that its stimulus measures are keeping the pandemic-struck economy afloat so they should not be clawed back too soon. The central bank will be determined to continue fiscal and monetary support for the Eurozone until the Euro-zone recovery is well under way. The policy can be a "snoozer," and the outcome could well be a non-event for the euro. It has been a good week for the euro, but the currency could get a bit of a boost if ECB President Christine Lagarde's comments after the meeting are more optimistic than expected.
As seen in the daily chart, EURUSD after hitting a high of 1.2079 is currently trading near crucial 61.8% Fibonacci Retracement level at 1.2032. Immediate 100-days moving average support lies at 1.2020 and consistent trading below 1.2000 will open doors for 1.1920-1.1840. The RSI stands at 78.10 mark which indicates overbought position in EURUSD pair. If the pair continued to sustain below 1.1840 then 1.1700 is expected. Meanwhile, on the upside, strong top-to-top trend line resistance is observed at 1.2125, and only on a breach of which next level is seen at 1.2240.
The views and investment tips expressed by the expert on fxstreet.com are his own and for information purposes only. Any advice shared by the expert needs to be checked with the independent financial adviser before making any investment decisions.