EURUSD dropped dramatically on Friday and remains marginally above the 1.12 handle today, trying to show a bullish bias as dollar demand looks subdued after the recent rally. Volatility in the market remains elevated amid conflicting signals from the Federal Reserve officials ahead of the crucial meeting later this month.
Now, traders shift focus to the ECB meeting due on Thursday. Ahead of this event, the euro will pay attention to the Eurozone confidence data, with weak numbers may reinforce expectations for a rate cut by the European monetary authorities. However, even a dovish rhetoric will likely be enough to put the euro under pressure at this stage as the common currency looks vulnerable after the odds of an aggressive Fed rate cut dropped.
Technically, the pair needs to hold above the 1.12 support in order to avoid a more robust sell-off, with the immediate meaningful resistance comes around the 100-DMA at 1.1250. Should the downside risks persist, the 1.12 handle could be challenged later this week. In this scenario, the euro will target 1.1180 first, where mid-June lows lie.