EUR/USD attempts recovery from 21-month lows, regains 1.0500

The bears loosened the grip behind the euro heading into the mid-Asian session, allowing a tepid-recovery in EUR/USD, in an effort to reclaim 1.05 handle.

EUR/USD weakest in almost 2 years

Currently, EUR/USD drops -0.22% to 1.0511, recovering from fresh multi-month lows struck at 1.0469 in early Asia. The EUR/USD pair trims losses, although remains under pressure amid a hawkish Fed statement and dots published yesterday, which indicated acceleration in the Fed’s rate hike prospects for next year (3 rate hike, up from 2 seen in Sept).

Fed’s hawkish stance sent the greenback to fresh 13-years tops against its major peers, sending the EUR/USD pair to fresh 21-month below 1.05 handle. The major eroded almost 200 pips after the FOMC statement made monetary policy divergence between both continents more pronounced.

The main currency pair is likely to extend weakness in the session ahead, as the European traders would absorb the Fed decision, bringing another round of fresh selling in the euro versus the US dollar.

Calendar-wise, we have a raft of flash manufacturing PMI reports due on the cards from the Euro area economies, while BOE policy decision and US inflation figures will also have some bearing on the spot.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0550 (psychological levels). A break beyond the last, doors will open for a test of 1.0572 (5-DMA) and from there to 1.0600 (round figure). On the flip side, the immediate support is placed at 1.0469 (21-month low) below which 1.0456 (March 2015 low) and 1.0400 (key support) could be tested.