EUR/USD faces resistance at 1.1100 ahead of ECB policy decision

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The EUR/USD is currently facing initial resistance at the psychological level of 1.1100, which is also a static level and the mid-point of the ascending trend. However, on the downside, the 50% Fibonacci level at the 1.1020 area could act as the next support level for the price to experience a pullback before continuing its bullish trend.

In terms of fundamentals, the EUR/USD has gained bullish momentum and achieved its highest daily close in over a year above 1.1050 on Wednesday. The European Central Bank (ECB) will announce its policy decisions later today, and if its outlook highlights a widening policy divergence with the US Federal Reserve (Fed), the pair could extend its rally.

On the other hand, the USD may gain momentum if the weekly Initial Jobless Claims and the first-quarter Unit Labor Costs data from the US show a big decline in jobless claims alongside a strong wage inflation reading, which could limit EUR/USD's upside.

During the Fed's recent policy meeting, it raised the policy rate by 25 basis points to the range of 5-5.25%, as expected. However, Powell's comments during the post-meeting press conference failed to convince markets, and the probability of another rate hike in June is virtually 0. The ECB is forecast to raise its key rates by 25 basis points, which could provide a boost to the EUR/USD if it opts for a significant hawkish surprise. Nonetheless, a deep correction could occur if the ECB refrains from committing to another rate increase at the next meeting.

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