“¢ The possibility of fresh Italian elections prompts some fresh selling.
“¢ Dovish ECB outlook further collaborated towards keeping a lid.
“¢ Technical rejection at 100-hour SMA suggests further downside.
The EUR/USD pair stalled its relief rally near the 1.1730 region and is now headed back towards the lower end of its daily trading range.
The relief from a failed anti-establishment coalition government, which helped the pair to open with a bullish gap, turned out to be rather short-lived amid a lot of uncertainty over a possible early election.
This coupled with a dovish ECB outlook, on concerns over low inflation and slowing growth, further collaborated towards keeping a lid on any further up-move, with the pair quickly retreating back below the 1.1700 handle.
From a technical perspective, the bullish momentum stalled at the 100-hour SMA and in absence of any major market moving economic releases, the incoming political headlines might continue to infuse volatility around the EUR crosses.
Technical levels to watch
A follow-through retracement back below 1.1675 level might negate prospects for any further recovery and turn the pair vulnerable to resume with its prior depreciating move and head towards testing the 1.1600 handle.
On the upside, the 1.1730-35 region might continue to act as an immediate hurdle, above which a bout of short-covering could lift the pair towards 1.1775 intermediate resistance en-route the 1.1800 handle.
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