EUR/USD breaks lower on renewed USD strength ahead of FOMC

   •  A sudden pickup in the USD demand prompts some aggressive selling.
   •  Retracing US bond yields fail to lend any support and stall the downfall. 
   •  Investors look for clues about future policy tightening for fresh directional impetus.

The EUR/USD pair extended its retracement slide from an intraday high level of 1.2032 and tumbled to fresh 3-1/2 month lows in the past hour.

Following a muted reaction to slightly better-than-expected ADP report, the US Dollar demand picked up pace during the early NA session and was seen as one of the key factors behind the pair's sudden fall of around 50-pips. 

Adding to this, possibilities of some short-term trading stops being triggered on weakness back below the key 1.20 psychological mark, coupled with some repositioning trade ahead of today's key event risk might have further collaborated to the pair's sharp slide over the past hour or so.

Even the ongoing retracement in the US Treasury bond yields did little to shake the USD bulls, with some fresh technical selling, following yesterday's close below the very important 200-day SMA, dragging the pair to its lowest level since January 11.

All eyes remain glued to the latest monetary policy update by the Fed, where any hints of steeper policy tightening should provide a fresh boost to the greenback and pave the way for a continuation of the pair's bearish trajectory.

Technical levels to watch

Any subsequent selling pressure might continue dragging the pair further towards 1.1935 intermediate support en-route YTD lows, near the 1.1915 region. On the upside, recovery attempts back above the 1.20 handle might continue to confront fresh supply near the 1.2030 region, above which the pair might dart towards reclaiming the 1.2100 handle.