On Thursday, the EUR/USD pair extended the previous session's rejection slide from the key 1.1500 psychological mark and came under some intense selling pressure. Renewed concerns over Italy's debt situation amid a dispute with the European officials over its budget spending plans exerted some fresh downward pressure on the shared currency. The European Commission’s new deficit forecasts for Italy met with some serious criticism from the Italian Prime Minister Giuseppe Conte and Economy Minister Giovanni Tria and triggered the initial leg of downfall.
Meanwhile, the US Dollar recovered its post-midterm election slide and further collaborated towards aggravating the selling pressure. The already stronger greenback got an additional boost after the Fed maintained hawkish stance with an upbeat assessment of the economy and indicated further gradual rate hikes in the future. The pair tumbled nearly 100-pips from an intraday high level of 1.1445 and extended the weakening trend through the Asian session on Friday.
With the only scheduled release of the preliminary Michigan Consumer Sentiment Index for November, today's economic docket lacks any major market-moving economic data and hence, the USD price dynamics might act as a key determinant of the pair's momentum on the last trading day of the week. Apart from this, any further escalation of the Italy-EU conflict might continue to dent sentiment surrounding the common currency and continue dragging the pair lower.
Looking at the technical picture, the pair failed to capitalize on Wednesday's breakthrough a bullish falling wedge. The formation of an indecisive Doji candlestick on the daily chart followed by a steep decline overnight further added credence to the false break-out and thus turns the pair vulnerable to head back towards challenging the key 1.1300 strong horizontal support.
A follow-through weakness could get extended towards the contracting wedge support, currently near the 1.1260 region, below which the pair is likely to accelerate the slide further towards testing sub-1.1200 level (the 1.1185-80 region).
On the flip side, any meaningful recovery attempt might now confront some fresh supply near the 1.1385-90 region and is closely followed by another stiff resistance near the 1.1425 horizontal level. Although a move beyond the mentioned barriers now seems elusive, a sustained break might trigger a short-covering bounce and help the pair to aim back towards conquering the 1.1500 handle.
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