- EUR / USD is heading lower, with 1.1250 at risk amid firmer yields and a USD.
- A bearish RSI supports a possible move towards 1.1200.
- On the other hand, 1.1300 is the level to beat for the EUR bulls for any significant rally.
The EUR / USD pair is seeing new selling pressure at the start of the European session on Monday.
The US dollar is firm on the day, following the rally in Treasury yields through the curve.
From a broader perspective, the euro continues to suffer against the dollar due to the divergence in monetary policy outlook between the Fed and the ECB.
The Fed will raise interest rates in mid-2022, while the ECB authorities have repeatedly denied talks of a rate hike at any time next year.
The focus, therefore, is now on this week’s FOMC minutes for clarity on the timing of a Fed rate hike and the pace of the decline in central bank bond purchases.
Meanwhile, looking at the 4-hour chart, the 1.1250 target was achieved last Friday, with downside risks still intact.
At the time of writing, the pair is trading at 1.1269, shedding 0.17% on the day. If the strong support around 1.1250 breaks, where Friday’s low and the downtrend line meet, then a test of the 1.1200 psychological level will be inevitable.
The RSI is holding the ground low just above the oversold territory, which suggests there is more room to the downside.
EUR/USD 4-hour chart
On the other hand, any significant recovery will gain traction after regaining the 1.1300 level.
The next critical barrier to the upside awaits the downslope 21-period moving average at 1.1317.
Higher up, the psychological barrier of 1.1350 will come into play.
EUR / USD additional levels