EUR/USD Forecast: recovery moves likely to be short-lived, bearish bias remains

Concern over the populist policies of the coalition government in Italy kept exerting pressure on the shared currency through Wednesday's trading session. Adding to this, a strong follow-through US Dollar upsurge, coupled with uninspiring EZ inflation figures further aggravated the downward momentum and dragged the EUR/USD pair below the 1.1800 handle to a fresh 2018 low. 

The pair touched an intraday low level of 1.1763 but managed to stage a goodish rebound as the greenback gave back some of its early strong gains to YTD highs. Meanwhile, the ongoing upsurge in the US Treasury bond yields might continue to underpin the USD and eventually keep a lid on any meaningful for up-move for the major, especially amid thin European economic docket. Later in the day, the second-tier US economic releases - the usual weekly initial jobless claims and Philly Fed Manufacturing Survey for May could help traders grab some short-term opportunities.

From a technical perspective, the pair’s recovery move could be attributed to some short-covering from near-term oversold conditions and is likely to confront some fresh supply near mid-1.1800s. Any subsequent up-move could get extended beyond the 1.1900 handle but now seems more likely to be capped near the 1.1935-40 strong resistance. 

On the flip side, weakness back below the 1.1800 handle would turn the pair vulnerable to extend the bearish trajectory initially towards 1.1735 intermediate support en-route the 1.1700 round figure mark, coinciding with 38.2% Fibonacci retracement level of the 1.0341-1.2556 strong up-move. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.