- Dovish ECB expectations continue to weigh on the shared currency.
- Tempered expectations of aggressive Fed easing underpinned the USD.
- The key focus will remain on Thursday’s ECB monetary policy decision.
The EUR/USD pair remained depressed at the start of a new trading week amid speculations that the European Central Bank (ECB) will send a strong dovish message when it announces the latest monetary policy decision on Thursday. The ECB is expected to change its forward guidance and signal a rate cut in September. The same was evident from the ongoing slide in the benchmark German 10-year government bond yield, which added to its recent slide and affected the shared currency negatively.
On the other hand, the US Dollar remained supported by tempered expectations of aggressive monetary easing by the Fed. Despite the US President Donald Trump's continuous pressure for immediate rate cuts, the greenback gains some traction against its European counterpart and further collaborated to the pair's weaker tone. The pair extended last week's rejection slide from 100-day EMA and remained under some selling pressure for the third consecutive day on Tuesday, hitting over one-month low during the Asian session.
In the absence of any major market-moving economic releases from the Euro-zone, dovish ECB expectations might continue to exert some downward pressure on the major. Later during the early North-American session, the US economic docket - featuring the second-tier releases of Existing Home Sales and Richmond Manufacturing Index will be looked upon for some short-term trading opportunities. The key focus, however, will remain on the upcoming ECB meeting on Thursday, which will play a key role in influencing the pair's momentum ahead of the FOMC meeting on July 30-31.
From a technical perspective, the pair already seems to have found acceptance below the 1.1200 handle and thus, remains vulnerable to extend the ongoing depreciating move. A follow-through selling below the 1.1180 area will reaffirm the bearish outlook and accelerate the slide further towards the 1.1130 intermediate support en-route yearly lows, closer to the 1.1100 round figure mark.
On the flip side, the 1.1210-20 region now becomes immediate resistance, above which the pair might attempt a move towards testing the 1.1250-55 intermediate resistance before eventually aiming to retest the 1.1280-85 supply zone. Only a decisive move beyond the mentioned barriers might negate the bearish outlook and set the stage for a meaningful recovery towards the 1.1330-40 region.
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