• Rise in Italy-German yield differential could hurt the EUR
• Lack of new info from Powell testimony could weigh over the USD. 

Last week's Fed and ECB minutes showed the monetary policy divergence is widening in the favor of the US dollar. Still, the downside in the EUR/USD was capped around 1.2260. 

However, the resilience may not last long if the Italy-German 10-year bond yield spread starts widening ahead of the Italian elections (due on March. 4). It is believed that Neither the center-left, the center-right, or the populists are likely to command a majority in parliament. So the spread may widen in the EUR-negative manner, i.e. German yields could drop due to rise in safe-haven demand. 

That said, all is not lost for the EUR/USD bulls as lack of new information on the path of interest rate hikes from Powell testimony (due later today) could yield another round of sell-off in the greenback. Kathy Lien from BK Asset Management believes Powell does not expect much in the ways of specifics from Powell outside of optimism and a vague plan to raise interest rates. 

EUR/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet, writes-

"Shorter term, and according to the 4 hours chart, the risk remains skewed toward the downside as a selling interest surged around a bearish 20 SMA, which crossed below the larger ones, while technical indicators stand within a negative territory, with limited bearish strength."

Support levels: 1.2250 1.2205 1.2160

Resistance levels: 1.2340 1.2380 1.2425