EUR/USD extends correction to test 20-DMA ahead of PMIs

The recovery in the EUR/USD pair gained further traction post-European open, driving the rate back beyond 1.06 handle.

EUR/USD takes-out 5-DMA at 1.0620                                                              

Currently, EUR/USD now drops -0.27% to hit fresh session highs of 1.0636, extending the break beyond 1.06 handle. The main currency pair staged a solid comeback and recovered almost 130 pips from new twenty-one month troughs, after the European session witnessed a dramatic turnaround in risk condition amid a sharp rebound in the European equities. The German benchmark, DAX 30 index jumps +1%, while the pan-European benchmark, Euro Stoxx 50 edges +0.45% higher.

Moreover, a broad based US dollar retreat also provided extra legs to the recovery in the major. The USD index now trades +0.31% at 101.05, retracing almost 60 pips from session tops.

However, the offered tone behind the euro remains intact, as markets still assess the ramifications of a No vote in the Italian referendum on constitutional reform.  Next of note for the major remains the German and Eurozone services PMI reports, Sentix investor confidence and retail sales, while the US ISM services PMI and LMCI will be also closely  eyed for further momentum.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0650 (psychological levels). A break beyond the last, doors will open for a test of 1.0685/90 (Nov 28 high/ 11-day high) and from there to 1.0720 (daily R2). On the flip side, the immediate support is placed at 1.0507 (multi-month low) below which 1.0456 (March 2015 low) and 1.0400 (zero figure) could be tested.