Having posted a session high at 1.0785 level, the EUR/USD pair turned lower and reversed part of yesterday's strong gains to three-week high.
Currently trading around 1.0735 level, testing session lows, the pair came under some profit-taking pressure after Interior Minister Angelino Alfano said that Italy could go for fresh elections as early as in February. Comments from a minister from Prime Minister Matteo Renzi's outgoing government raised uncertainty over snap elections, perceived to be negatively impacting the shared currency.
The next big fundamental trigger would be the ECB's upcoming monetary policy meeting on Thursday. The central bank is expected to extend or possibly even add to its current EUR 80 billion per month of asset purchase program. Also in focus would be next week's crucial FOMC meeting, where the Fed is widely expected to raise interest rates.
Diverging monetary policy stance from the Fed and ECB might add on the near-term bearish sentiment surrounding the shared currency and might continue dragging the pair, even from current levels.
Technical levels to watch
From current levels, 1.0700-1.0695 region is likely to act as immediate support below which the pair is likely to drift back towards 1.0600 handle before eventually dropping to test 1.0565-60 strong horizontal support. On the upside, 1.0760-65 area now seems to have emerged as immediate hurdle, which if cleared has the potential to boost the pair immediately towards 1.0800-1.0810 resistance area.
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