After a brief phase of consolidation near two-week tops of 1.1880 in early Europe, the EUR/USD pair finally broke to the downside and extended the retreat to test mid-1.18.
EUR/USD down to test 1.1850
The spot is last seen trading near 1.1860 region, defending minor bids amid broad based US dollar recovery. The USD index attempted a tepid bounce from two-week troughs of 92.64 and now flirts with session highs reached at 92.78 levels.
The latest leg lower in the major can be also attributed a bout of profit-taking ahead of the key US inflation data and ECB President Draghi’s speech. US PPI data will draw special attention, after the FOMC minutes showed that a majority of the members believe that the inflationary factors are not just transitory.
Meanwhile, markets remain wary over the impending decision over the Catalan’s independence, after the Spanish PM Rajoy gave the Catalan government eight days to take a call on the Catalonia’s independence, failing which Rajoy call a snap regional election after activating Article 155 of the constitution, which would allow him to sack the Catalan regional government.
The immediate focus now remains on the Eurozone industrial production data for fresh trading impetus on the Euro.
EUR/USD Technical View
Karen Jones, Analyst at Commerzbank wrote: “EUR/USD continues to see a rebound from the 1.1662 August low. Initial resistance at 1.1833, the end of September high and 20 and 55 day moving averages have been eroded and we would allow for an extension to the 1.1910/25 resistance line and 2nd August high, where we think it will struggle, this guards the 1.2092 high. We would treat a break below 1.1660 as the trigger for a sell off to the mid-June high at 1.1296 and the more important 1.1110 end of May low”.
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