EUR/USD Bounces off 1.1300 neighbourhood; shows resilience below 23.6% Fibo.
- EUR/USD drifts lower for the second straight day amid a further USD recovery from a multi-year low
- The technical setup favors bulls and warrants caution before positioning for a deeper corrective fall.
- A sustained break and acceptance below 1.1300 could pave the way for some meaningful decline.
The EUR/USD pair attracts some follow-through selling for the second straight day on Wednesday and drops to a one-week low during the Asian session. Spot prices, however, rebound a few pips from the 1.1300 neighborhood and currently trade around the 1.1380 region, still down over 0.35% for the day.
The US Dollar (USD) builds on the overnight bounce from the vicinity of a three-year low touched on Monday and turns out to be a key factor exerting downward pressure on the EUR/USD pair. That said, the weakening confidence in the US economy, along with the prospects for more aggressive policy easing by the Federal Reserve (Fed) and the risk-on impulse, caps gains for the safe-haven buck and helps limit losses for the currency pair.
From a technical perspective, the EUR/USD pair showed resilience below the 23.6% Fibonacci retracement level of the recent rally witnessed over the past month or so, from the very important 200-day Simple Moving Average (SMA). Furthermore, the bullish Moving Average Convergence Divergence (MACD), along with the fact that the daily Relative Strength Index (RSI) on the daily chart has eased from the overbought zone, favors bulls.
Hence, it will be prudent to wait for a sustained break and acceptance below the 1.1300 round figure before confirming that the EUR/USD pair has topped out near the 1.1575 area, or the highest level since November 2021 touched earlier this month. This will set the stage for a further corrective decline towards the 1.1250 area, or the 38.2% Fibo. level, en route to the 1.1200 mark and the 1.1160-1.1155 region, representing the 50% Fibo. level.
On the flip side, the 1.1400 round figure might now act as an immediate hurdle ahead of the Asian session high, around the 1.1425-1.1430 region. Some follow-through buying should lift the EUR/USD pair further beyond the 1.1500 psychological mark, towards challenging the multi-year peak, around the 1.1575 region touched earlier this month. Spot prices could eventually aim to reclaim the 1.1600 round-figure mark.
EUR/USD daily chart
