The EUR/USD pair had good two-way moves at the start of a new trading week and was influenced by a combination of diverging forces. After an initial dip to an important resistance break-point, now turned support, near the 1.1725, the pair regained traction following the release of better-than-expected German Ifo business climate index. The up-move got an additional boost, lifting the pair beyond the 1.1800 handle to a fresh 3-1/2 month tops on the back of some upbeat comments by the ECB President Mario Draghi.
In his introductory remarks at a hearing on economic and monetary affairs in the European Parliament, Draghi said that he expected a vigorous pick-up in underlying inflation and provided a strong lift to the shared currency. The positive momentum, however, started losing momentum during the US trading session and the pair finally ended the day with modest losses, just below mid-1.1700s.
The US Dollar selling moderated towards the end of Monday's trading session and was seen as one of the key factors behind the pair's intraday retracement slide. As market participants assessed the latest developments in the trade battle between the US and China, the ongoing upsurge in the US Treasury bond yields helped ease an intense bearish pressure surrounding the buck. Investors turn their focus back on this week's key event risk - the highly anticipated FOMC decision on Wednesday, where the central bank is widely anticipated to raise interest rates by 25bps.
From a technical perspective, the pair's repeated failure to sustain above the 1.1800 handle and the inability to provide a daily close above 38.2% Fibonacci retracement level of the 1.2556-1.1301 downfall now seems to suggest that the near-term bullish momentum might have already run out of steam. A convincing break below the 1.1725 resistance-turned-support, leading to a subsequent fall below the 1.1700 handle will reinforce the expectations and accelerate the slide towards 100-day SMA support near the 1.1660 region.
On the flip side, the 1.1780 level now becomes an immediate strong hurdle and is closely followed by the 1.1800 handle. A sustained move beyond the mentioned barrier now seems to pave the way for an extension of the positive momentum towards June monthly high resistance near mid-1.1800s. A follow-through buying has the potential to continue lifting the pair further towards the 1.1900 handle en-route an important confluence resistance near the 1.1925-30 region, comprising of 50% Fibonacci retracement and the very important 200-day SMA.
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