EUR/USD finds support near 1.13, remains on track to post modest daily gains

• US Dollar Index stays in the negative territory below 97.
• ECB's Praet says the ECB could change guidance.
• Coming up: ZEW Economic Sentiment for Germany and the eurozone.

The EUR/USD pair took advantage of the broad-based USD weakness and started the week on a positive note to extend its rebound from the 4-month low that it touched last Friday. However, the lack of fundamental drivers on Monday suggests that the pair's action today is most likely a technical correction. As of writing, the pair was up 0.15% on the day at 1.1311.

Dovish comments from Fed officials last Friday forced the greenback to weaken against its rivals and dragged the US Dollar Index below the 97 mark. Atlanta Fed President Raphael Bostic said that he was favouring one rate hike both in 2019 and 2020 and San Francisco Fed President Daly argued that if the economy were to grow 2% with a 1.9% inflation rate, there wouldn't be a need to hike rates this year. With American traders enjoying a long weekend on Monday, the US Dollar Index, which was last seen down 0.15% on the day at 96.80, struggled to make a meaningful recovery and extended its losses.

Meanwhile, the ECB's chief economist Peter Praet earlier in the session said that the ECB could adopt rate guidance if the European economy were to slow sharply. "Biggest problem by far is political uncertainties persisting for so long, related to protectionism, Brexit," Praet added. The ZEW on Tuesday is scheduled to publish its Economic Sentiment data for Germany and the eurozone. Analysts expect the index for the eurozone to improve to -18.2 in February from -20.9 in January. A disappointing reading is likely to weigh on the shared currency and make the pair's recovery to gather momentum.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

The pair set a daily low of 1.1294, flirting with the 23.6% retracement of the 1.1513/1.1233 decline at 1.1300, quickly bouncing from the level, although the recovery stalled below the 38.2% retracement of the same decline at 1.1340, the immediate resistance. In the 4 hours chart, the pair is trading below its 20 SMA while below the larger ones, while technical indicators hold within positive ground, although with uneven strength. The positive momentum should increase on a break above the mentioned 1.1340 Fibonacci resistance, something that has little chances to happen until Tuesday.

Support levels: 1.1300 1.1260 1.1215  

Resistance levels: 1.1340 1.1380 1.1425