EUR/USD forecast: More weakness expected below 1.1200 mark
|- The USD rebounds sharply in reaction to Friday's upbeat US retail sales data.
- Escalating geopolitical tensions further benefitted the buck's safe-haven status.
- Traders eye Draghi's speech for some impetus ahead of FOMC on Wednesday.
The US Dollar rebounded sharply on Friday and exerted some heavy pressure on the EUR/USD pair after the latest US economic data suggested that the Fed might not be in a hurry to cut interest rates anytime soon. The headline US monthly retail sales came in slightly weaker-than-expected but the fact that ex-autos and control group sales surpassed market expectations, along with upward revisions of the previous month's readings weakened the case for an immediate rate cut move by the Fed and provided a strong boost to the greenback.
This was followed by better-than-expected Industrial Production and Capacity Utilization figures for May, which coupled with escalating geopolitical tensions, further benefitted the USD's relative safe-haven status and continued dragging the pair through the US trading session on Friday. The pair extended its retracement slide from the 1.1340-50 supply zone and tumbled to the 1.1200 neighbourhood, albeit managed to find some support near 61.8% Fibo. retracement of the 1.1107-1.1348 recent corrective bounce.
The pair held steady near the mentioned handle through the Asian session on Monday and remains at the mercy of USD price dynamics in absence of any major market moving economic releases from the Euro-zone. Later during the early North-American session, the release of Empire State Manufacturing Index for June might further collaborate towards producing some short-term trading opportunities. The key focus, however, will be on the ECB President Mario Draghi's scheduled speech, which might influence the near-term price dynamics ahead of the next event risk - the keenly awaited FOMC monetary policy update on Wednesday.
From a technical perspective, the pair's repeated failures to find acceptance above 100-day SMA clearly indicates that the near-term selling bias might still be far from over. A follow-through weakness below the 1.1200 handle will reinforce the bearish outlook and turn the pair vulnerable to aim back towards challenging yearly lows support near the 1.1100 round figure mark with some intermediate support around mid-1.1100s.
On the flip side, the 1.1255 region - marking 38.2% Fibo. retracement level now seems to act as an immediate resistance and is closely followed by 100-day SMA, around the 1.1270-75 zone and the 1.1300 round figure mark. Momentum above the mentioned hurdles could get extended towards the recent swing high, around the 1.1345-50 region, which if cleared decisively will negate the bearish set-up and prompt some aggressive short-covering move in the near-term.
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