EUR/USD Forecast: bulls might now struggle near 1.2230 level

On Wednesday, the EUR/USD pair initially rose to a fresh 3-year high level of 1.2322 but subsequently started losing ground after some ECB officials expressed concerns over its recent appreciation. The US Dollar also gained some positive traction and further collaborated to the pair's retracement of over 125-pips from tops. The greenback's recovery move got an additional boost from better-than-expected US industrial manufacturing and capacity utilization data. 

Also collaborating to the buck's goodish rebound was the Federal Reserve's Beige Book, which provided evidence for the health of the US economy and reaffirmed that the central bank was still on track for three rate hikes in 2018. Meanwhile, the release of mostly in-line final EZ CPI print did little to provide any impetus, with long-unwinding trade turning out to be one of the key factors behind the pair's drop back below the 1.2200 handle. 

Traders now look forward to the German Bundesbank President Jens Weidmann's remarks for some fresh impetus during the European trading session. Later during the early NA session, the US housing market data, along with Philly Fed Manufacturing Index and the usual initial weekly jobless claims data might also provide some short-term trading opportunities.

Technically, yesterday's sharp pull-back from fresh multi-year tops and a subsequent break below the 1.2200 handle now seems to suggest that the pair might have topped out in the near-term. The pair, however, has managed to find some support near 1.2165 area, marking 38.2% Fibonacci retracement level of 1.1916-1.2264 latest leg of upsurge. Hence, a follow-through buying interest beyond the 1.2200 handle could lift the pair back towards 23.6% Fibonacci retracement hurdle near the 1.2225-30 region, which might now cap any near-term up-move.

On the flip side, the 1.2165 region might continue to protect the immediate downside, which if broken would reaffirm near-term bearish bias and should pave the way for an extension of the pair's corrective slide towards the 1.2100 handle, nearing 50% Fibonacci retracement level.