EUR/USD remained under slight bearish pressure after recording modest losses on Tuesday and trading below 1.0900 on Wednesday, its lowest level in more than two months. Investors may remain on the sidelines ahead of the European Central Bank's (ECB) monetary policy announcements on Thursday, as the economic calendar does not offer any high-impact data releases on Wednesday.
The Relative Strength Index (RSI) indicator on the 4-hour chart remains slightly below 30, indicating that EUR/USD could stage a technical correction in the near term before extending its downtrend. On the downside, the Fibonacci 78.6% retracement of the latest uptrend forms immediate support at 1.0870. If the pair drops below this level and starts using it as resistance, technical sellers could be interested. In this scenario, 1.0800 (round level) and 1.0780 (stable level, starting point of the uptrend) could be seen as the next support levels.
If EUR/USD reclaims 1.0900 (round level, stable level) and stabilizes above it, sellers could move to the sidelines and pave the way for an extended recovery. In this case, the next technical resistance can be seen at 1.0950 (Fibonacci 61.8% retracement) and 1.1000 (Fibonacci 50% retracement).
The negative shift seen in risk sentiment helped the US dollar (USD) remain resilient against its major rivals in the second half of the day on Tuesday, not allowing EUR/USD to rebound.
On Wednesday morning, US stock index futures were mixed. EUR/USD is likely to lag if safe-haven flows continue to dominate market action after Wall Street's opening bell.
Still, investors may refrain from betting on extended euro selloffs ahead of ECB policy decisions. The latest macroeconomic data from the Eurozone showed a slowdown in activity data as well as further progress in deflation, following which markets expect the ECB to cut key rates by 25 basis points.