EUR/USD Forecast: Stage seems set for a move towards reclaiming 1.1400 mark

• Some renewed USD selling bias assisted EUR/USD to regain positive traction on Monday.
• The Fed’s announcement boosted sentiment and further undermined the safe-haven USD.
• Investors eye German ZEW survey, US macro data for some short-term trading impetus.
• The key focus will be on the Fed Chair Powell’s semi-annual testimony before the Senate.

The EUR/USD pair caught some fresh bids on the first day of a new trading week and rallied over 100 pips from the daily swing lows, around the 1.1225 region. The strong intraday positive move was sponsored by the emergence of some fresh selling around the US dollar, which struggled to gain any traction despite the sour market mood. Fears about a second wave of coronavirus contagion and the possibility of renewed lockdowns dampened prospects for a sharp V-shaped economic recovery and took its toll on the global risk sentiment.

The greenback remained depressed, rather failed to gain any respite following the release of better-than-expected Empire State Manufacturing Index. In fact, the gauge improved sharply to -0.2 in June from -48.5 previous, albeit did little to impress the USD bulls. Meanwhile, a strong bounce in the US equity markets further undermined the greenback's relative safe-haven status against its European counterpart. Investors cheered the Fed's announcement on Monday that it would begin buying of corporate bonds.

The Fed said that it will start purchasing a diversified range of investment-grade US corporate bonds to support markets and ensure credit market liquidity amid the coronavirus pandemic. The move boosted investors' appetite for riskier assets, which was evident from a positive mood across the global equity markets on Tuesday. This, in turn, kept the USD bulls on the defensive and assisted the pair to add to its overnight gains beyond the 1.1300 round-figure mark. The pair was last seen trading just below mid-1.1300s as market participants now look forward to the release of the German ZEW Economic Sentiment Index for a fresh impetus.

From the US, monthly retail sales data will be the key highlight from Tuesday's economic docket. Later during the US session, the Fed Chair Jerome Powell will testify before the Senate Banking Committee and influence the USD price dynamics, which might eventually produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the overnight rally and a subsequent strength beyond 1.1330 level might have already shifted the near-term bias back in favour of bulls. Hence, some follow-through buying should now assist the pair to make a fresh attempt towards conquering the 1.1400 round-figure mark. A sustained strength beyond the mentioned level will confirm a near-term bullish breakout and set the stage for a move towards retesting YTD tops, just ahead of the key 1.1500 psychological mark.

On the flip side, immediate support is pegged near 200-hour SMA, around the 1.1300 round-figure mark, below which bears might aim back towards challenging the 1.1225-15 intermediate support. A convincing breakthrough might now turn the pair vulnerable to fall further towards the 1.1135-30 support zone. Some follow-through selling, leading to a subsequent weakness below the 1.1100 mark now seems to pave the way for a fall towards the very important 200-day SMA, around the 1.1025-20 region.