• ECB says downside risks have been increasing.
• 10-year US T-bond yield drops more than 1% on Thursday.
• US Dollar Index erases the majority of its daily gains in the NA session.

The EUR/USD pair extended its slide during the European trading hours and touched its lowest level since January 25 at 1.1324. However, with the greenback losing its bullish momentum in the second half of the day, the pair reversed its course and erased all of its daily losses. As of writing, the pair was virtually unchanged on the day at 1.1360.

Earlier today, the monthly Economic Bulletin published by the European Central Bank reiterated that the incoming information about the eurozone economic activity had surprised on the downside while adding economic indicators had signalled a moderation in the global growth momentum as well. Furthermore, the data from Germany revealed that the industrial production contracted by 0.4% on a monthly basis in December following November's 1.3% decline to further weigh on the shared currency.

Despite the selling pressure surrounding the euro, the pair staged a recovery during the NA session as the greenback struggled to preserve its strength. A more-than-1% drop witnessed in the 10-year T-bond yield amid souring market sentiment in the second half of the day forced the USD to retrace its daily advance. As of writing,  the US Dollar Index was modestly higher on a daily basis at 96.50.

The European economic docket on Friday will be relatively eventless only featuring the trade balance data from Germany. Investors could take this opportunity to book some profits ahead of the weekend and help the pair extend its technical correction.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

In the 4 hours chart, technical indicators recovered modestly from daily lows before losing directional strength, now holding within bearish ground. The 20 SMA accelerated its decline currently at around 1.1360 and far below the larger ones, another sign that bears dominate the pair. A strong static support comes at 1.1315, with a downward extension expected on a break below it.

Support levels: 1.1315 1.1280 1.1245

Resistance levels: 1.1375 1.1400 1.1430