Euro Hits Critical Point, Eyes ECB Meeting

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In a dramatic decline from late-March highs just below the 1.1200 handle, the euro has been suffering losses for the tenth session in a row on Wednesday as USD bulls continue to dominate across the market these days. The EURUSD pair is now at a critical point, threatening the 1.0800 mark where the low for the year and the lowest level since May 2020 arrive. 

The common currency is further pressured by the greenback that has settled around the 100.50 zone during the European trading hours, retaining a solid upside tone as risk-off trend continue to persist while hawkish Fed bets continue to rise amid the elevated inflation. Of note, both the annual and the monthly rate of the US PPI exceeded expectations in March, adding to inflationary concerns in the country.  

As such, should the bullish pressure surrounding the buck continues to build in the near term, a break below the mentioned critical support could bring more momentum in that direction for the euro, with the next cyclical lows arriving at 1.0635. 

However, traders could refrain from a deeper sell-off ahead of the upcoming ECB meeting due on Thursday. The central bank is widely expected to deliver a more hawkish message as the Eurozone now faces record-high inflation. A hawkish shift to the ECB policy outlook could be expressed in adjusting the monthly purchases to conclude the program by June in order to start hiking rates in the second half of the year. 

In this scenario, EURUSD could find some demand around long-term lows and witness a solid bounce, especially as the USD looks overbought at this stage. Otherwise, the 1.0800 figure would turn into resistance for the first time in two years.