EUR/USD targets 1.0500 amid stronger USD, ECB in focus

The greenback regained poise versus its major rivals over the last hours, knocking-off EUR/USD to fresh four-day lows at 1.0529, where it now wavers. 

The major extends its gradual decline so far this week, now reversing almost 75% of Friday’s rally. The ongoing weakness in the spot is mainly driven by a renewed rally treasury yields, as a March Fed rate hike is almost a done deal, particularly after yesterday’s solid ADP jobs data from the US. The 2-year treasury yields, which mimic the short-term Fed rate hike expectations, trade nearly 1% higher and head for a retest of 1.378%; the highest level since 2009.

ECB Preview: Policy to be left unaltered – Goldman Sachs

All eyes now remain on the upcoming ECB monetary policy decision due later today at 1245GMT, followed by the ECB President Draghi’s conference, for fresh direction on the EUR/USD pair. The ECB is expected to keep interest rates and QE unaltered, although a cautious tone in central bank’s language could be expected ahead of elections in Netherlands and France. Meanwhile, the ECB may offer an upbeat assessment of the economy, in wake of rising inflation levels and solid manufacturing output.

EUR/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet, noted, “From a technical point of view, the risk is clearly towards the downside, as in the 4 hours chart the price stands comfortable below 1.0565, a major Fibonacci resistance, while the 20 SMA has lost its bullish strength, now turning lower and converging with the 100 SMA in the 1.0590 region.”

“Also, the Momentum indicator in the mentioned chart turned flat within negative territory, whilst the RSI indicator continues heading lower, reaching fresh 2-week lows at 40. Much of Thursday's direction will depend on Draghi's announcements, but in the case of a sudden recovery, the most that the pair can advance is up to 1.0700/20, where selling interest is aligned,” Valeria added.