EUR/USD analysis: Weak price action continues ahead of German CPI, US GDP

The EUR/USD pair extended this week's pullback from near two-week tops and remained under some selling pressure for the third consecutive session on Wednesday. The shared currency failed to gain any respite from the fact that Italy might have averted a snap election as centre-left Democratic Party (PD) and populist Five Star Movement finally agreed to form a coalition government. On the economic data front, German Consumer Climate tracked by GfK came in at 9.7, a tad above estimates, albeit was largely negated by a larger-than-expected contraction in the German Import Prices and failed to impress the bulls.

Dovish ECB expectations/USD strength exerted some pressure

Firming market expectations that the European Central Bank is preparing to announce a fresh wave of monetary stimulus in September - including a potential reduction of interest rates and the restart of the QE program - seemed to be one of the key factors weighing on the common currency. This coupled with a modest pickup in the US Dollar demand - despite the inversion of the US bond yield curve and the US President Donald Trump's latest criticism on the Fed - further collaborated to the pair's weaker tone through Wednesday's trading session.
 
However, the downside remained limited, at least for the time being, as investors awaited a fresh catalyst before positioning for the pair's next leg of a directional move. The pair now seems to have stabilized below the 1.1100 handle and look forward to the preliminary estimates of the August German consumer inflation figures for a fresh impetus. Later during the early North-American session, a revised estimate of the US GDP growth figures for the second quarter of 2019 might further collaborate towards producing some short-term trading opportunities.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much for the major and the near-term bias remains tilted in favour of bearish traders. A follow-through weakness below the 1.1075 horizontal support will reaffirm the negative outlook and turn the pair vulnerable to accelerate the downfall back towards challenging the key 1.10 psychological mark with some intermediate support near yearly lows - around the 1.1025 zone.
 
On the flip side, any attempted recovery beyond the 1.1100 handle might now confront some fresh supply near the 1.1115-20 region, above which the pair bounce could get extended towards the 1.1155-65 resistance zone. Momentum beyond the said barrier is likely to trigger a short-covering move towards the 1.1200 round figure en-route the next major hurdle near 100-day SMA – currently near the 1.1210 region.