• A modest USD pull-back from multi-week tops helped bounce off monthly lows.
• The up-move lacked any obvious catalyst and thus, runs the risk of being sold into.
• Italian budgetary concerns might act as a key factor capping any meaningful up-move.
The EUR/USD pair extended its steady recovery move from monthly lows and is currently placed at session tops, around the 1.1470-75 region.
The pair stalled this week's rejection slide from the vicinity of 100-day SMA, levels beyond the 1.1600 handle, and once again managed to find some support near the 1.1435-30 region. The uptick lacked any obvious fundamental catalyst and could be solely attributed to a modest US Dollar retracement.
Despite some renewed pickup in the US Treasury bond yields, supported by firming market expectations for gradual Fed rate hikes beyond 2018, the USD failed to preserve early gains to multi-week tops and was seen as one of the key factors helping the pair to snap three consecutive days of losing streak.
It, however, remains to be seen if the recovery is backed by any genuine buying or turns out to be an opportunity to initiate fresh selling positions amid persistent worries over Italy's proposal to widen its budget deficit.
The EU's letter to warn Italy of its budget plan seems to have raised prospects of a direct clash and the same was evident from a continuous widening of the Italian-German 10-year bond yield spread, currently at 5-1/2 year highs, which might now contribute towards keeping a lid on any meaningful up-move for the shared currency.
Today's US economic docket lacks any major market moving releases and hence, traders are likely to take cues from Atlanta Fed President Raphael Bostic's scheduled speech in order to grab some short-term opportunities on the last trading day of the week.
Technical levels to watch
Immediate resistance is now pegged near the 1.1490-1.1500 region, above which a bout of short-covering could lift the pair further towards 1.1535-40 supply zone. On the flip side, weakness below monthly lows, around the 1.1435-30 region, is likely to accelerate the fall towards the 1.1400 round figure mark.
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