EUR/USD eyes more weakness below 1.0960 as focus shifts to Fed/ECB policy

• EUR/USD is expected to show further weakness if fails to keep the auction above 1.0960.
• S&P500 surrendered gains on settlement, portraying caution among market participants ahead of the Fed’s policy.
• US Manufacturing PMI continued to remain below the 50.0 threshold consecutively for the sixth time.

The EUR/USD pair is hovering near the eight-day-old support of 1.0960 in the early Asian session. The major currency pair is expected to display a sheer sell-off after breaking below the same. The downside bias for the shared currency pair looks solid as the US Dollar Index (DXY) is preparing for a fresh rally above 102.20 amid the monetary policy by the Federal Reserve (Fed), which will be announced on Wednesday.

S&P500 surrendered gains in the late New York session and ended Monday with some losses, portraying caution among market participants ahead of the Fed’s interest rate policy. Investors failed to capitalize on this despite easing United States banking jitters as JP Morgan buyout First Republic Bank from US regulators.

The USD Index has recaptured two-week-old resistance of 102.20 and is expected to remain in the driving seat as Fed policymakers are preparing for one more 25 basis points (bps) interest rate hike.

Meanwhile, the US ISM Manufacturing PMI (April) remained upbeat on Monday. The Manufacturing PMI continued to remain below the 50.0 threshold consecutively for the sixth month but rebounded from the annual lowest figure to 47.1. Also, New Orders Index improved to 45.7 from the consensus of 45.5.

On the Eurozone front, weak economic growth amid higher inflation is becoming a major problem for European Central Bank (ECB) policymakers. The shared continent has recorded a growth rate of 0.1% in the first quarter lower than the consensus of 0.2%.

This week, ECB President Christine Lagarde is set to raise interest rates further, however, uncertainty is building for the pace of rate hike to be opted by the central bank.