EUR/USD falls to five-month lows near 1.0600

• The Euro falls due to the combination of a dovish ECB and a hawkish Fed.
• The pair is heading for its worst weekly result in more than a year.
• Bullish attempts are expected to be limited below 1.0725 and 1.0755.

The Euro has fallen like a stone over the past two days, crushed by the combination of a dovish Federal Reserve and a pessimistic European Central Bank. The EUR/USD pair has lost almost 2% in the last three days and is about to close its worst weekly performance in more than a year.

The ECB kept rates unchanged at 4% in a controversial decision as some committee members favored a rate cut. This, together with the moderate tone of the monetary statement, has increased expectations that the bank will soon begin to relax its monetary policy. Investors have marked June on their calendars.

This would put the ECB in the unprecedented position of changing its monetary policy before the Federal Reserve. The Fed finds itself in a polar opposite situation, as the impact of US inflation and strong macroeconomic data is forcing the bank to scale back its monetary easing plans.

In this scenario, it is difficult to see any support for the Euro. The pair could see some correction from strongly oversold levels on intraday charts, although bullish attempts are expected to be limited. Supports are located at 1.0630 and 1.0525. Resistances are located at 1.0725 and 1.0755.