On Friday, the EUR/USD pair started retreating from the 1.1800 handle, or over three month tops and was being weighed down by softer flash Euro-zone PMI prints for September. Adding to this, a goodish US Dollar rebound, primarily triggered by fresh Brexit headlines-led sell-off in the British Pound, prompted some additional long-unwinding trade on the last trading day of the week.
The corrective slide, so far, has been rather shallow as investors now seemed to refrain from placing any aggressive bets ahead of the next big event risk - the highly anticipated FOMC decision, scheduled to be announced this Wednesday.
In the meantime, the release of German Ifo Business Climate will be looked upon for some short-term trading impetus at the start of a new trading week. The key focus will be on the ECB President Mario Draghi's testimony about the economy and monetary policy before the European Parliament Economic and Monetary Affairs Committee, which might infuse a fresh bout of volatility around EUR crosses.
From a technical perspective, the pair has already confirmed a decisive break through a bullish head & shoulders chart pattern on the daily chart, though the up-move now seems to confront some resistance near 38.2% Fibonacci retracement level of the 1.2556-1.1301 downfall.
A sustained move beyond the mentioned hurdle would add credence to the bullish break-out and accelerate the up-move further towards June monthly high resistance near mid-1.1800s. The momentum could further get extended, even beyond the 1.1900 handle, towards testing an important confluence region, comprising of 50% Fibonacci retracement and the very important 200-day SMA.
On the flip side, the neck-line resistance break-point of the bullish pattern, near the 1.1700 handle, now seems to protect the immediate downside, which if broken might prompt some additional weakness and drag the pair further towards 1.1660-55 horizontal support. A follow-through selling seems more likely to be limited and find decent support near 23.6% Fibonacci retracement level, around the 1.1610-1.1600 region.
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