• A sudden fall in the USD prompts some follow-through short-covering move.
• Further gains likely to remain capped amid continued Italian political uncertainty.
After an initial dip to 1.1757, the EUR/USD pair caught some fresh bids and was now seen building on overnight rebound from 6-month lows.
The pair's latest leg of sharp uptick over the past hour or so, further beyond the 1.1800 handle, could be solely attributed to a sudden fall witnessed around the US Dollar. Despite some renewed uptick in the US Treasury bond yields, the greenback failed to preserve early gains and was seen as one of the key factors prompting some additional short-covering move for the second consecutive session.
The up-move, however, lacked any strong bullish conviction amid continued political uncertainty in Italy. This coupled with the latest US-China trade optimism and expectations of faster Fed monetary policy tightening cycle might further contribute towards capping any meaningful up-move.
Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have bottomed out in the near-term and the up-move is backed by some genuine buying, and not solely driven by short-covering.
• EUR rebound may be limited - AmpGFX
There isn't any major market-moving economic data due for release on Tuesday and hence, the USD price-dynamics might continue to act as an exclusive driver of the pair's momentum.
Technical levels to watch
A follow-through buying interest has the potential to continue lifting the pair towards 1.1845-50 supply zone, above which the momentum could further get extended towards reclaiming the 1.1900 handle.
On the flip side, any meaningful retracement back below the 1.1800 handle now seems to find strong support near the 1.1765 level, which if broken would pave the way for an extension of the pair's near-term bearish trajectory.
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