On Thursday, the EUR/USD pair witnessed a sharp reversal from monthly tops on news of a terror attack in Paris. Adding to this, optimistic comments from the US Secretary of Treasury Mnuchin, to bring forward a major tax reform, further boosted the US Dollar and collaborated to the pair's retracement. Mnuchin's comments, however, were not enough to fully negate the prevalent bearish sentiment surrounding the greenback, led by recent jawboning by the US President Donald Trump, helping the pair to once again defend the 1.0700 and catch some fresh bids on Friday.
The pair spiked to 1.0738 level on better-than-expected French PMI prints for April, but failed to build on the up-move in wake of a slight disappointment from German PMI figures. Bulls also seemed unimpressed with the upbeat composite Euro-zone PMI prints and now seemed to lighten their Euro bets heading into the big event risk - the crucial French Presidential election on Sunday.
On 1-hourly chart, the pair now seems to be forming a bearish head & shoulders chart pattern, with neck-line support around 1.0705 region. Hence, it would be prudent to wait for a decisive break below the 1.0700 handle before confirming that the pair might have actually topped out and could extend the pull-back further from current levels.
On a sustained break below the said handle, also nearing 38.2% Fibonacci retracement level of 1.0905-1.0570 downfall, the pair is likely to accelerate the slide back towards 23.6% Fibonacci retracement level support near mid-1.0600s, en-route an important confluence support near 1.0620 region, comprising of 100-day SMA and the medium-term ascending trend-line.
On the upside, sustained move above 1.0735 level would negate the bearish formation and could assist the pair back towards 61.8% Fibonacci retracement level resistance near 1.0775 region.
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