EUR/USD recovered ground on Wednesday after hitting a fresh monthly low of 1.0808, just a few pips above its YTD low set in March at 1.0805.
The pair moved lower during the European session, weighed by lingering geopolitical concerns. However, the U.S. dollar weakened during the New York session—sending the EUR/USD back above the 1.0880 level—mainly weighed by the pullback seen in Treasury yields across the curve.
The yield on the U.S. 10-year note dropped to 2.7% after hitting a peak of 2.836% on Tuesday, while the 30-year bond yield fell below 2.8% from a high of 2.871%.
On Thursday, the European Central Bank will announce its monetary policy decision. While it is expected to stay put on rates, a more aggressive approach toward inflation is likely.
The ECB could also adjust its monthly bond purchases, which, for now, are scheduled to end in the third quarter. Such a stance would be seen as hawkish and could provide some relief to the shared currency.
From a technical perspective, EUR/USD maintains a bearish bias according to indicators in the daily chart, although losing momentum. Both the RSI and the MACD remain in negative territory but exhibit the loss of selling pressure. At the same time, the price remains fairly close to its 22-month low of 1.0805 and below its main moving averages.
If EUR/USD manages to recover the 1.0900 zone, next resistances could be faced at 1.0980, 20-day SMA, and then the 1.1000 area. A critical short-term resistance level is seen at the 1.1150 zone, which represents the 23.6% retracement of the May 2021 - March 2022 decline.
On the other hand, failure to consolidate above 1.0900 could resume the selling pressure and send the EUR/USD back to recent lows. A break below the 1.0805-00 area would expose the next support at around 1.0727, the April 2020 monthly low.