EURUSD extends the pullback from monthly highs around 1.1180 registered at the start of the week. The pair retreated below the 100-DMA and now threatens the 1.11 handle as the greenback gradually regains strength against the European currencies amid the prevailing risk-off sentiment.
Also, traders are getting more cautious ahead of the ECB meeting due tomorrow. It is widely expected that the central bank will retain the current monetary policy but will emphasize that it stands ready to adjust its policy instruments after a raft of easing measures implemented at the last meeting, including lower rates and the reintroduction of quantitative easing. Besides, it will be Draghi’s last meeting as the president, so he is not expected to announce any new measures.
As such, the potential downside pressure for the common currency from this event will likely be limited. On the other hand, further Brexit developments could negatively affect the euro in the short term. According to the latest reports, Labour MP Richard Burgon said the party will back a general election if the EU agrees to extension.
Technically, the inability to hold above the 1.11 support in the near term could lead to further losses to the 1.1070 area. On the upside, the pair needs to regain the 100-DMA in order to challenge fresh highs should the ECB’s tone come as neutral.