The EUR/USD pair erased a significant part of Wednesday’s Fed-induced rally as European Central Bank’s (ECB) President Christine Lagarde delivered a cautious press conference, which weighed on the euro.
At the time of writing, the EUR/USD trades at the 1.0915 area, posting a 0.65% daily loss, after printing its highest level in nine months at 1.1085. At the same time, the U.S. dollar managed to stage a noticeable rebound as its DXY index gained 0.5%, around 101.70.
The ECB decided to raise its main interest rates by 50 bps, being the highest level since November 2008 for the deposit facility rate, which now stands at 2.5%. The monetary policy statement confirmed another 50 bp hike in March, but during the press conference, Lagarde only committed to a “strong intent” and limited the hawkish tone. A dovish tilt was also perceived as the inflation risk was described as more balanced, with consumer inflation coming down from cycle highs while economic activity is doing better than expected.
On the other hand, the dollar recovered across the board on Thursday, trimming post-Fed losses. At the same time, markets continued to cheer Jerome Powell’s confirmation that the disinflationary process has begun as U.S. bond yields continued to fall. However, they ended the day away from lows, while the Wall Street indexes extended gains except for the Dow Jones Industrial Average, which closed nearly flat.
On Friday, the nonfarm payrolls report will be release, with expectations pointing to a 185,000 job increase in January.
From a technical standpoint, the EUR/USD maintains the short-term bullish bias, with the price hovering near multi-month highs and above its main moving averages. At the same time, indicators remain in positive territory despite losing some bullish momentum.
On the upside, the following resistance levels are seen at 1.1035 and the 1.1085 high, followed by the 1.1100 psychological area. On the flip side, support levels could be found at 1.0880, and the 20-day simple moving average at 1.0832.