EUR/USD off 2-week highs, but stays above 1.1850

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

Haresh Menghani, Analyst at FXStreet wrote: “…the pair runs the risk of correcting back towards the trend-channel support near the 1.1835-30 region, also nearing 38.2% Fibonacci retracement level. A convincing drop below the mentioned support would invalidated the up-move and turn the pair vulnerable to break below the 1.1800 handle and head towards testing 23.6% Fibonacci retracement level support near 1.1770 area.”

“Alternatively, a clear break through 1.1880-85 barrier would indicate a fresh bullish break out and could lift the pair beyond the 1.1900 handle towards its next major resistance around 1.1940 horizontal level,” Haresh adds.