EUR/USD looks vulnerable ahead of ECB Draghi, Fed minutes

The EUR/USD pair failed several attempts to regain 1.12 handle and traded almost unchanged throughout the Asian session, as markets await ECB Draghi’s speech for next direction.

EUR/USD targets next psychological support of 1.1150

The major has entered a phase of downside consolidation, after having dipped to 1.1170 levels in the overnight trades, in response to a broad bid in the US dollar. The greenback rallied against its main competitors on the back of a sharp rise in the US yields, as odds of a June Fed rate hike increased to 83.1% versus 78% seen earlier this week, CME FedWatch tool showed. The 2-year treasury yields, which mimic the interest rate expectations, leaped 2.53% to 1.311% on late-Tuesday.

However, losses in the spot remained capped ahead of a key support at 1.1160, as upbeat Euro area PMI reports and German IFO data continue to underpin the Euro. Moreover, latest headlines on the Budget plan also weigh down on the buck, lending some support to the major.

German May IFO: A big beat across all indicators

Looking ahead, all eyes remain on the ECB Draghi’s speech due later today for fresh hints on tapering, however, Draghi’s failure to provide any cues on exiting the ultra-loose monetary policy program, will bring back monetary policy divergence between the Fed and ECB to the fore ahead of the FOMC minutes. The FOMC minutes are likely reveal that the Fed remains on track to raise rates in June.

Besides, the US existing homes sales and EIA crude inventories report will fill in an otherwise light economic calendar today.

EUR/USD Technical Levels

Valeria Bednarik at FXStreet noted: “The EUR/USD pair settled a few pips below 1.1200, and seems poised to correct lower, although in the longer term, is too early to confirm an interim top. In the 4 hours chart, the price has found some support around a bullish 20 SMA, whilst technical indicators turned sharply lower from overbought levels, currently pressuring their mid-lines and ready to break lower. The pair has an immediate support at Monday's low of 1.1161, while a stronger one comes at 1.1080. Approaches to this last will likely attract buying interest. Back above 1.1220, the risk turns towards the upside, with room then to extend the advance up to 1.1300.”