The EUR/USD pair has moved within a 35-40 pips narrow trading range and entered a consolidation phase following the Italian referendum-led slide to the lowest level since March 2015.
Currently trading around 1.0560-70 band, still weaker over 0.8% for the day, the pair tumbled to a twenty-one month low after Italians voted "no" in Sunday's referendum and rejected Prime Minister Matteo Renzi's reform proposal. Further downslide, however, was limited as investors had already anticipated an unfavorable result for Italian Prime Minister Matteo Renzi.
Looking forward, ECB would now be inclined to extend its monthly asset purchase program beyond March and might also divert the program towards Italian government bonds in order to curb any volatility in wake of the referendum. The expectations might eventually restrict any swift recovery and even turn the pair vulnerable to continue sliding further in the near-term.
On the economic data front, the final version of Euro-zone PMI prints might provide some impetus during European session ahead of the US ISM non-manufacturing PMI, later during NA session.
Technical levels to watch
Momentum above 1.0575-80 immediate resistance now seems to confront immediate strong resistance near 1.0600 handle above which a fresh bout of short-covering is likely to lift the pair immediately towards 1.0635 resistance area. On the downside, renewed weakness below 1.0540-35 zone is likely to get extended towards back towards 1.0500 psychological mark support, which if broken now seems to drag the pair towards March monthly lows support near 1.0470-60 region.
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