EUR/USD Forecast: The latest corrective bounce already seems to have run out of steam
|The EUR/USD pair kicked off the new week on a stronger note, albeit failed to capitalize on the intraday positive momentum. The build on Friday's goodish bounce from three-month lows and was further supported by a follow-through US Dollar retracement amid growing optimism over US-China trade talks. Except for a modest USD weakness, there was no apparent reason behind the pair's goodish up-move to an intraday high level of 1.1334 and thus, lacked any strong conviction.
The pair quickly retreated around 25-pips from session tops and extended the slide further below the 1.1300 handle during the Asian session on Tuesday. On the economic data front, the release of German ZEW Economic Sentiment might influence sentiment surrounding the shared currency and eventually produce some meaningful trading opportunities during the European session. Meanwhile, the US economic docket lacks any major market moving releases and hence, the key focus will remain on a new round of US-China trade talks, starting today.
From a technical perspective, the pair's inability to capitalize on the attempted recovery move and the reemergence of selling at higher levels clearly suggest that the near-term bearish pressure might still be far from over. A follow-through weakness back below the 1.1290 level is likely to accelerate the slide towards 1.2560 horizontal zone, which if broken will reaffirm the negative outlook and drag the pair back towards challenging multi-month lows, around the 1.1215 region. A follow-through selling has the potential to continue dragging the pair, even below the 1.1200 round figure mark, towards its next support near mid-1.1100s.
On the flip side, attempted recovery move might continue to confront some supply near the 1.1330-40 region, which if cleared might trigger some short-covering bounce, though is likely to remain capped at 50-day SMA barrier, currently near the 1.1385-90 region.
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