EUR/USD: bears eyeing a break below ascending trend-channel, Draghi's testimony awaited
|The EUR/USD pair reversed an early dip to sub-1.19 level and is now looking to fill the bearish opening gap, led by a disappointing victory for Merkel’s Conservatives (CDU) Party, which is now expected to try to form a coalition with the Liberals and the Greens. With coalition talks expected to take months, markets believe that Germany is unlikely to overly focus on much-needed reforms in the EU and could dampen investors' appetite for the shared currency.
Against the backdrop of the political landscape in the region’s largest economy, investors now look forward to the ECB President Mario Draghi's testimony about the economy and monetary developments before the European Parliament Economic and Monetary Affairs Committee. Investors will closely scrutinize Draghi's comments for signals over tapering ECB's €60bn bond-buying program and the recent Euro strength, which might eventually provide some fresh impetus for the major.
Meanwhile, increasing prospects for an additional Fed rate hike move by the end of this year might also collaborate towards keeping a lid on any strong near-term up-move. Hence, traders might continue to refrain from placing aggressive bets and would prefer to wait for a decisive break through the pair's 4-week old trading range before committing to the next leg of directional move.
From a technical perspective, the pair has been finding some buying interest at a short-term ascending trend-channel support, currently near the 1.1900-1.1895 region. A convincing break below the mentioned support is likely to accelerate the fall towards the lower end of the recent trading range, near the 1.1830-25 region, which if broken would confirm a bearish breakdown and turn the pair vulnerable to extend its corrective slide from yearly tops touched earlier this month.
On the flip side, any subsequent recovery beyond mid-1.1900s might continue to confront some fresh supply near the key 1.20 psychological mark. Even if the pair manages to clear this immediate hurdle, further up-move is likely to be capped at the trading range resistance near the 1.2050-60 region. Only a sustained move beyond mid-1.2000s would negate any near-term bearish bias and assist the pair to resume with its prior appreciating move.
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