EUR/USD Forecast: corrective bounce could get extended, EZ PMIs eyed

The EUR/USD pair had a good two-way move on Thursday and finally managed to end the day with some goodish gains near the 1.1600 handle. The pair initially drifted lower to retest YTD lows on the back of news that Italy appointed Lega Nord’s Economist and a well-known euro-sceptic Alberto Bagnai as Senate Finance Committee head. 

The selling pressure, however, once again abated ahead of the key 1.1500 psychological mark, with a modest US Dollar retracement helping the pair to rally around 125-pips from intraday lows. The USD lost its upside momentum and turned lower for the day, primarily on the back of disappointing US economic data that showed Philly Fed manufacturing index plummeting to 17.9 in June. 

The pair held on to its positive tone above the 1.1600 handle through the Asian session on Friday as market participants now look forward to the flash Euro-zone PMI figures for some fresh impetus. The composite PMI is expected to have ticked lower to 53.9 in June as compared to previous month's reading of 54.1.

From a technical perspective, the pair is yet to clear its immediate strong hurdle near the 1.1640-50 region, coinciding with weekly tops and 38.2% Fibonacci retracement level of the post-ECB slide. But the fact that it has been finding decent buying interest near the 1.1500 handle suggests that the corrective bounce could get extended in the near-term. 

Hence, a follow-through up-move could easily lift the pair beyond 50% Fibonacci retracement level resistance near the 1.1680 region, and the 1.1700 handle, towards testing a previous support now turned resistance near the 1.1720-25 zone - 61.8% Fibonacci retracement level.

On the flip side, the 1.1600-1.1590 region (23.6% Fibonacci retracement level) now seems to protect the immediate downside, which if broken might turn the pair vulnerable to slide back towards testing the 1.1510 strong horizontal support.