EUR/USD spikes through 1.0600 handle but lacking follow through momentum

The EUR/USD pair gained fresh traction during early NA session and is now building on to the momentum back above 1.0600 handle. 

The key US Dollar Index extended previous session's decline and has been the key factor lifting the pair to multi-day tops, near 1.0610-15 band. Moreover, possibilities of some stops getting triggered, on a decisive break through 1.0600 handle, could have further collaborated to the pair's sharp up-move in the past hour or so.

However, in absence of any major market moving releases / news / events, and lackluster trading action on Friday, seems to suggest that the current leg of up-move has been primarily led by short-covering rather than genuine buying. Hence, it would be prudent to wait for a follow through buying interest before confirming a near-term bullish break-out above a short-term descending trend-line resistance near 1.0600 handle.

Having said that, the ongoing slump in the short-end bund yields pointed towards mounting fears of political instability in the region. In fact, the two-year bund yields hit a new record low of -0.95% on Friday and might now contribute towards restricting further upside for the major.

On the economic data front, new home sales data and revised consumer sentiment index are slated for release during NY trading session.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "the 4 hours chart shows that the upward potential is well limited, not only because the pair retreated from the mentioned trend line, but also because it's again pressuring the 1.0565 region, a major Fibonacci support, whilst the 20 SMA maintains a bearish slope, despite being below the current level. Also, technical indicators in the mentioned chart have turned lower, with the RSI indicator already crossing below its 50 level. Should the price accelerate below the mentioned support, the next one comes at 1.0520. Seems unlikely the pair can break below this last, but if it does, 1.0470 is next."

"A recovery beyond the mentioned daily high could see the pair extending up to 1.0635, the weekly high, en route to 1.0660."