Having failed to sustain at higher levels, the EUR/USD pair trimmed gains to test the 1.18 handle amid broad based US dollar recovery in sync with Treasury yields.
EUR/USD clings to 5-DMA support at 1.1794
The spot rallied hard in the overnight trades and reached three-day tops at 1.1816 in early Asia, as the US dollar was dumped across the board on lackluster US housing data.
However, the spike above 1.18 handle was short-lived, as the US bulls staged a solid comeback after the 10-year Treasury yield spiked 4 basis points on global equity-surge led better investor risk appetite, which reduced the demand for the safe-haven Treasuries.
Meanwhile, markets continue to digest the latest updates surrounding the next Fed Chair appointment as well as on the US tax overhaul plans, which also affects the sentiment around the buck, eventually impacting the EUR/USD pair.
The EUR markets also assess the Reuters headlines reported overnight, citing a government source, as saying that, "Catalonia’s regional president told a meeting of his party he would formally declare independence if Spain starts the process of suspending the region’s autonomy on Thursday."
Calendar-wise, there is nothing relevant due out from the Euroland and hence, attention turns towards the US docket, with the jobless claims and Philly Fed manufacturing index slated for release.
EUR/USD Technical View
Analysts from Brown Brother Harriman (BBH) noted: “In essence, the first head and shoulders pattern was part of the head of a larger head and shoulders pattern. Even if one does not subscribe to technical analysis, the takeaway may be important. First, the bearish technical view would be weakened by a euro move back above the larger shoulders ($1.1880-$1.1910). Second, a break of the $1.1660 area could spur further liquidation of long euro speculative positions. A break of $1.1600 area would signal a move toward $1.1250, not far from the 50% retracement of this year's euro advance.”
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