EUR/USD drops back to 21-DMA as ECB plans QE boost

• EUR/USD reverses the previous rebound to test 21-DMA, now support.
• Cautious mood lifts the demand for the safe-haven US dollar.
• Downside appears more compelling after ECB said to boost APP next week.

EUR/USD is easing towards 1.1300, having failed to find acceptance above the 1.1350 psychological level.

The latest downswing in the spot comes on the back of the rebound in the US dollar across the board. The cautious market mood has revived the dollar’s safe-haven demand, investors reassess the risks of the new Omicron covid variant on the global economic growth.

The latest Reuters reports, citing that the European Central Bank (ECB) is planning a temporary and limited boost to its regular Asset Purchase Programme (APP) at its December meeting, added to pain in the euro.

The divergent monetary policy outlooks between the Fed and the ECB are likely to keep the downside open for the major towards its yearly lows of 1.1185. The Fed is on track to accelerate its tapering when it meets next week amid elevated inflation.

In absence of any relevant top-tier US economic data, the ECB reports and the US Jobless Claims will influence the pair’s price action. The sentiment on Wall Street amid covid updates will also play a pivotal role.

EUR/USD: Technical outlook

The spot is back to test its 21-Daily Moving Average (DMA) at 1.1311 on the downside.

The 14-day Relative Strength Index (RSI) has turned lower below the 50.00 level, justifying the latest move lower in the main currency pair.

A sustained break below the 21-DMA will expose the rising trendline support on the daily sticks at 1.1232.

Daily closing below the latter is needed for a retest of 1.1200. The next stop for EUR bears is seen at the yearly lows of 1.1185.

EUR/USD: Daily chart

On the flip side, the 1.1350 psychological level acts as an initial hurdle on the road to recovery.

Buying resurgence could then see the 1.1400 round figure back into play.

EUR/USD: Additional levels to consider