EUR/USD Price Forecast: Further decline targets the 200-day SMA

EUR/USD remains under pressure and approaches 1.1900.
Investors keep looking to dollar dynamics for price direction.
The FOMC meeting will be the salient event later in the week.
The single currency inaugurates the week in the negative territory and gradually approaches the key support at 1.1900 the figure, always amidst the continuation of the recovery in the greenback.

The better note in the dollar comes on the back of further strength in US yields, which remains the almost exclusive driver of the price action of the global assets in the last weeks.
In fact, and despite Chairman Powell recently re-affirmed the dovish stance of monetary policy, investors continue to see the inflation’s glass half full, always in response to the expected higher inflation stemming from the planned extra fiscal spending under the Biden’s administration.

On the latter, it is worth recalling that the $1.9 trillion stimulus package became law during last week, and there are many analysts who still see further stimulus in the pipeline in the medium/longer run.

Strictly on the EUR-side, the ECB confirmed its cautious/dovish stance at its event last week, although there is the perception among market participants that the central bank will stick to the verbal intervention for the time being, leaving the action only if the outlook deteriorates in a quite a worrying way in the future.

For now, the US economic outperformance narrative continues to lend support to the buck, although it faces strong opposition from the view of the strong rebound in the economic activity overseas and its consequent support to the risk-associated complex.

Later in the week, the region’s economy will be in the limelight following the appearances of ECB’s Vice-President Luis De Guindos and Chief Christine Lagarde. Across the Atlantic, all the looks will be upon the FOMC gathering, with consensus pointing to an upbeat note when comes to assessing growth projections but the overall tone is seen on the dovish side, at least until substantial progress is made on both employment and inflation.

Near-Term Outlook
Extra pullbacks in EUR/USD appears on the cards against the current backdrop, with the immediate target at the 1.1830 region. In this contention area converges the 2021 lows (1.1835) and the critical 200-day SMA (1.1831). If this zone is cleared, then there is an interim support at a Fibo level (of the November-January rally) at 1.1762. In case bulls regain the upper hand, last week’s highs around 1.1990 emerge as the next hurdle of note ahead of the psychological hurdle at 1.2000.