EUR/USD was on track towards its fifth consecutive day of losses on Thursday as the currency pair extended its recent slide to dip below key support at the 1.1100 level. In the process, the exchange rate touched a new two-week low.
For much of the first half of February, EUR/USD had risen sharply as the dollar weakened on significantly lowered expectations of another Federal Reserve rate hike due to global economic growth concerns and financial market turmoil, among other factors.
During the current week, however, the dollar made a rebound while the euro came under increased pressure early in the week after European Central Bank (ECB) President Mario Draghi made comments indicating a strong willingness and readiness to implement additional monetary easing measures. These comments further weighed on the shared currency, pushing the EUR/USD pair back down to key support at the noted 1.1100 level.
Since its 1.0500-area lows in early December, EUR/USD has been trading within a rising parallel trend channel. Last week’s 1.1375 high reached strong resistance at the top of that channel, as well as the underside of a major uptrend line extending back to the sub-1.0500 lows back in March of last year. Having retreated sharply from that resistance since late last week and currently having dipped under the 1.1100 level, EUR/USD has reached a critical juncture.
Despite recent concerns over the Fed’s somewhat dovish policy stance following December’s rate hike, the ECB continues to be squarely embedded in easing mode. This contrast between the two central banks, if it continues, may be viewed as a bearish indication for EUR/USD. In the event of sustained trading below the 1.1100 level, the next major downside target remains at the major 1.0800 support level.