EUR/USD drops towards 1.1300 level, led by strong USD

• EUR/USD bears take charge, loses upside momentum.
• The euro hit 16-month low post dovish comments by the ECB chief.

The EUR/USD pair renewed its vow and continues to slide at the Early Asian session on Wednesday, trading around yearly low levels of 1.1300 level. The pair expects that the European Central Bank (ECB) would stick to its dovish policy settings in the near term against the backdrop of a slowing economy.

The cross-currency pair is at its lowest since July last year. European Central Bank's ECB president Christine Lagarde said that tightening monetary policy to curb inflation could choke off the eurozone's recovery. She further iterated factors pushing prices higher would fade next year, increasing contrast from hawkish hints from other central banks.

Furthermore, Scotiabank expects "Widening Bunds-UST differentials remain a firm downward force on the euro. The spread between US and German debt in the 10-year space has risen to its largest since April as markets adjust for the Fed's tapering and eventual hikes."

The US T-bond yields remain strong ahead of Fed daily speak. Meanwhile, the greenback continued its strength forward, reaching fresh 2021 highs, further hitting the common currency. Both retail trade data and industrial activity in the US beat expectations signalling strength in the American economy, further pressuring the Federal Reserve to hike rates earlier. The US dollar now has weakened investor appetite, leaving EUR/USD vulnerable to a much-needed catalyst to show direction. To further add pressure, US President Joe Biden formally signed a $1.0 trillion, bi-partisan infrastructure bill underpinning the dollar value.  

Looking ahead, investors will be eyeing for (ECB) Financial Stability Review, Consumer Price Index data release from Eurostat. ECB member Isabel Schnabel speech could provide some insight. 

EUR/USD technical levels