EUR/USD: ECB minutes could make or break the EUR

The EUR/USD pair's retreat from the two-week high of 1.2396 to 1.2365 in Asia indicates the rally from the April 6 low of 1.2216 may have run out of steam, possibly due to rising fears of US-Russia war over Syria.

Also, the Fed minutes carried a hawkish tinge, but failed to lift the treasury yields may be because the geopolitical tensions triggered a flight to safety (increased demand for Treasuries). However, a significant majority believes that the lackluster response from the treasury yields is an indication the market isn't buying the Fed's hawkish talk.

Hence, the greenback could come under pressure (EUR/USD could resume the rally) if the US-Russia tensions fade.

That said, the fate of the EUR also depends on the tone of the ECB minutes, due today at 11:30 GMT. The hawkish tone could boost odds of an early rate hike and put a bid under the common currency.

Note, the money markets have pushed back the probability for a 10bps increase in the deposit rate to June 2019, compared with March 2019 forecasted at the turn of the year. Also, the Fed revised higher the neutral rate at the March meeting. Hence, the ongoing rally is unjustified, as per rate expectations. Hence, EUR risks falling sharply if the ECB minutes carry a dovish tinge.

EUR/USD Technical Levels

A close below 1.2330 (50-day MA) would confirm the rally from 1.2216 has ended and could yield a deeper pullback to 1.2254 (April 3 low) and 1.2216 (April 6 low). On the higher side, a move above 1.24 (psychological level) would revive the bullish view and open up upside towards 1.25 (psychological hurdle) and 1.2556 (Feb. 16 high).