EUR/USD forecast: Not out of the woods yet, FOMC minutes eyed for bearish confirmation

• Market reaction to Italian political development turns out to be short-lived.
• A modest USD pullback from multi-week tops helped gain some traction.
• Bulls lacked strong conviction ahead of the key release of FOMC minutes.

After an initial dip to a near three-week low level of 1.1066, the EUR/USD pair regained some positive traction on Tuesday and snapped five consecutive days of losing streak. Against the backdrop of ECB easing speculations, the shared currency was further weighed down by the latest Italian political development - wherein country's Prime Minister Giuseppe Conte announced his resignation after Salvini broke the coalition government and called for an election.

Bulls at the mercy of USD price dynamics

Barring some immediate reaction, the pair lacked any strong follow-through selling, rather witnessed some near-term short-covering bounce amid a modest US Dollar pullback from multi-week tops. Ahead of this week's important release of the latest FOMC meeting minutes, some renewed weakness in the US Treasury bond yields undermined the USD demand and turned out to be one of the key factors behind the pair's goodish intraday rebound of over 40-pips.
 
The pair managed to settle above the 1.1100 round figure mark but lacked any strong follow-through as investors refrained from placing aggressive bets and preferred to wait for fresh clues over the prospect of more easing by the Fed. The US central bank in July lowered benchmark interest rates for the first time since the financial crisis and hence, the minutes of the meeting will be closely scrutinized for fresh insights on a further rate cut at September policy meeting.
 
This will be followed by speeches from influential central bankers at the key Jackson Hole Symposium - including the Fed Chair Jerome Powell on Friday - which will eventually play a key role in determining the next leg of a directional move. In the meantime, the pair seems more likely to consolidate the recent losses and remain confined in a narrow trading band amid absent relevant market-moving economic releases - either from the Euro-zone or the US.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much except that the pair's inability to capitalize on the attempted bounce reaffirms near-term bearish bias. A follow-through weakness below the 1.1065 region (Friday's/overnight swing low) will add credence to the bearish outlook and turn the pair vulnerable to breakthrough yearly lows, around the 1.1025 region, and aim towards challenging the key 1.10 psychological mark en-route the 1.0975 zone - a support marked by a descending trend-line extending from December 2018.
 
On the flip side, the 1.1125 region now seems to act as an immediate strong resistance, above which a bout of short-covering might assist the pair to recover further, albeit seems more likely to remain capped near the recent trading range support breakpoint - around the 1.1175-80 region.