EUR/USD erased most of its overnight rise ahead of the ECB rate decision and more gains faded after the central bank hiked 50 bps as they had indicated, leaving the euro looking vulnerable if recent market turmoil persists.
Investors seemed to focus more on ECB rhetoric surrounding recent uncertainty that has been weighing on risk assets.
The ECB reiterated that inflation was too high but also said the elevated level of uncertainty reinforces the importance of data dependency to policy approach.
The statement also said the ECB's policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed.
Rates markets reacted bearishly.
German 2-year yields DE2YT=RR added to earlier losses, which helped to widen the dollar's yield advantage over the euro.
EUR/USD turned lower on the session and neared 1.0550.
Technicals turned more bearish to intensify downside signals.
Daily and monthly RSIs are falling and a long upper wick is now in place on the March monthly candle.
Should euro area rates fall further and risk sentiment remain fragile EUR/USD's fall is likely to extend toward support near 1.0500.
A break of that support could bring the 1.0200 area into focus.
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