• Faster Fed rate hike cycle underpins USD demand.
• EUR weighed down by concerns about easing inflation.
• EZ flash CPI in focus ahead of US GDP.
Having posted a session high level of 1.2242, the EUR/USD pair met with some fresh supply and drifted into negative territory for the second consecutive session.
The new Fed Chair Jerome Powell's first congressional testimony on Tuesday, which endorsed further gradual increases in the federal funds rate, continues to underpin the US Dollar demand and has been one of the key factors behind the pair's sharp fall of around 30-35 pips from session tops.
Meanwhile, investors remained concerned about easing inflationary pressure in the Euro-zone, especially after yesterday's disappointing German CPI, which fueled expectations that the ECB’s bond-buying program could get extended beyond the September deadline and was further seen weighing on the shared currency.
Hence, today's key focus would be on the flash version of composite Euro-zone CPI print for February, due for release during the European session and would be looked upon for some immediate respite for the bulls.
From a technical perspective, the pair has now moved on the verge of breaking below an important horizontal support near the 1.2200 handle, also coinciding with 50-day SMA, which if broken decisively would confirm a near-term bearish breakdown and open room for a continuation of the pair's bearish trajectory.
Later during the early NA session, the second estimate of the US Q4 GDP growth numbers would also play a key role in determining the pair's next leg of directional move.
Technical levels to watch
A convincing break below the mentioned handle would turn the pair vulnerable to extend the downfall towards the 1.2100 handle en-route 1.2070-65 strong horizontal support.
On the flip side, any recovery attempts might now confront fresh supply near the 1.2250-55 region and subsequent up-move seems more likely to be capped at the 1.2300 handle.
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