EUR/USD holds to gains, consolidates above 1.1600

• EUR/USD rebounds after hitting fresh 1-year low.
• DXY retreats signaling a potential short-term top.

The EUR/USD pair consolidate daily gains during the US session, benefit by a weaker US dollar. The euro rebounded after falling to test May lows.

The pair started to recover after the Bank of England decision that boosted rate hike expectations. From the lows, EUR/USD rose more than a hundred pips and peaked at 1.1632. It pulled back finding support above 1.1600.

The euro is about to end the day near the highs, still within the range of the last five days, closer to the upper limit located around 1.1630/50.

The DXY hit a 1-year high but it was again rejected from above 95.00 and is about to end lower, far from the high. The move lower from the top could signal that short-term top is in place that could lead to corrective moves, supporting the recovery of EUR/USD.

EUR/USD Technical outlook

“The pair is not yet out of the woods despite the latest recovery to the current 1.1600 region, but the fact that it bounced strongly from the yearly low may suggest that the upward corrective movement could continue, exacerbated by profit-taking ahead of the weekend”, said Valeria Bednarik, Chief Analyst at FXStreet.

According to her, in the 4 hourchart, technical indicators have entered positive territory, maintaining their upward momentum, with the RSI partially losing its upward strength but at around 55, indicating persistent buying interest.

The weekly high at 1.1644 is the key resistance level to surpass to favor an upward continuation, notes Bednarik.