EUR/USD Forecast: 1.1200 mark to act as a key level for bearish reversal

• EUR/USD witnessed a modest pullback on Tuesday amid the emergence of some USD buying.
• Concerns about a surge in COVID-19 cases globally drove some haven flows towards the USD.

The EUR/USD pair edged lower on Tuesday and extended the previous day's modest pullback from the 1.1350 supply zone amid a modest pickup in the US dollar demand. Despite the recent positive economic data, investors remain concerned that the ever-increasing number of COVID-19 cases could trigger renewed lockdown measures and once again put breaks on the economic activity. Growing worries about the second wave of coronavirus infections weighed on investors' sentiment, which was evident from a weaker tone surrounding the global equity markets and drove some haven flows towards the greenback.

The shared currency was further pressured by German data, which indicated that the recovery momentum in the economic powerhouse of the EU was less impressive than anticipated. After falling 17.5% in April, the German Industrial Production rebounded in May and rose 7.8% but was still down 19.3% as compared to a year earlier. Adding to this, European Commission, in the Summer Economic Forecasts, projected that the EU economy will shrink more in 2020 – by 8.3% – and recover less in 2021 – by 5.8% – as compared to a 7.4% contraction in 2020 and a rebound of 6.1% in 2021 estimated in May.

The pair reversed a part of the overnight positive move to two-week tops, albeit lacked any follow-through and held steady above mid-1.1200s through the Asian session on Wednesday. In the absence of any major market-moving economic releases, either from the Eurozone or the US, the pair remains at the mercy of the USD price dynamics and developments surrounding the coronavirus saga.

Short-term technical outlook

From a technical perspective, repeated failures near the 1.1345-50 region constituted to the formation of a bearish triple-top pattern on short-term charts. Despite the bearish set-up, the pair, so far, has managed to hold above a symmetrical triangle resistance breakpoint, now turned support near the 1.1250 zone. Any subsequent fall might turn the pair vulnerable to accelerate the slide towards the 1.1200 round-figure mark.

The latter coincides with an ascending trend-line – also the lower boundary of the symmetrical triangle. A convincing breakthrough the 1.1200 mark will add credence to the bearish formation and set the stage for a further near-term depreciating move. The pair might then fall further towards the 1.1100 round-figure mark before eventually dropping to the very important 200-day SMA, around the 1.1040 region.

On the flip side, the 1.1300-1.1310 region now seems to have emerged as an immediate resistance, above which the pair could climb back to retest the key 1.1350 barrier. Bulls need to wait for a sustained strength beyond the said hurdle before positioning for any further near-term appreciating move towards the 1.1400 mark. Some follow-through buying has the potential to lift the pair further towards YTD tops, just ahead of the key 1.1500 psychological mark.