EUR/USD on the defensive as Biden considers $2 trillion stimulus package

EUR/USD is trading near crucial support at 1.2140, as the US dollar and Treasury yields are cheering reports that the US President-elect Joe Biden is considering a bigger-than-expected stimulus package. 

According to CNN, Biden is expected to unveil a Covid-19 relief package worth $2 trillion on Thursday. The stimulus price tag is bigger than the $750 billion fiscal stimulus plan projected by Goldman Sachs last week. Senator Chuck Schumer was reportedly pressing Biden for a spending package worth $1.3 trillion. 

Fiscal and monetary stimulus typically weakens the home currency. The dollar, however, is drawing bids on prospects of a bigger spending package. 

That's because Treasury yields, which have had more say in determining exchange rates of late, are rising in response to the stimulus news. The 10-year yield has added four basis points to trade near 1.11%.

The pair could continue to take cues from Treasury yields and Italy's political crisis. The shared currency ran into offers on Tuesday after Italy's former Prime Minister Matteo Renzi said he's pulling his party's ministers from the ruling coalition, putting the administration's future at risk amid the coronavirus pandemic, as noted by market observer Holger Zschapetiz. 

The minutes of the European Central Bank's latest policy meeting and the US weekly employment data scheduled for release later today could influence the currency pair. 

Technical levels