EUR/USD dips below 1.23 as markets digest ECB's dovish posture

• EUR hits a four-day low of 1.2295 in Asia.
• Dovish Draghi driving the common currency lower.

The EUR/USD pair has hit a four-day low of 1.2295 in Asia as FX desks continue to digest the ECB's dovish posture.

Eurozone bond yields dropped on Thursday

Across the eurozone, bond yields fell 1-3 basis points yesterday. Germany’s 10-year bond yield fell to 0.57 percent - the lowest level in seven weeks. French and Dutch 10-year bond yields also fell to their lowest levels since January, according to a Reuters report.

Further, as of writing, the 10-year US-German yield spread stands at 225 basis points - the highest level since Dec. 2016. Clearly, the current levels in the EUR are unjustified considering the widening yield differential.

The yield differential has moved in the EUR-negative manner after top ECB policymakers this week said they would end the stimulus only after inflation shows a sustained rise towards the 2 percent inflation target. Ahead in the day, the common currency will likely continue tracking the yield differential.

EUR/USD Technical Levels

The pullback from 1.2413 (March 14 high) has established another lower high on the daily chart and suggests the erratic rise from 1.2273 (March 9 low) has ended. That said, only a clear break below 1.2273 would signal resumption of the sell-off from 1.2446 (March 8 high) and open doors for 1.2206 (Feb. 9 low) and 1.2154 (March 1 low).

On the higher side, a close above 1.2413 would allow a stronger rally to 1.25 (psychological level + multiple daily highs) and 1.2538 (Jan. 25 high).