• A modest pullback prompts some short-covering amid highly oversold conditions.
• The uptick lacks strong conviction amid concerns over Euro-zone economic slowdown.
The EUR/USD pair reversed an early dip to the lowest level since May/June 2017 and quickly recovered around 20-25 pips from an intraday low level of 1.1118.
Despite a surprisingly stronger than expected US durable goods orders data, the US Dollar trimmed a part of its early strong gains to the highest level in nearly two-year tops and turned out to be the only factor prompting some short-covering bounce from highly oversold conditions.
The uptick, however, lacked any strong conviction and is likely to remain capped amid growing concerns about an economic slowdown in the Euro-zone, further reaffirmed by the ECB Vice-President Luis de Guindos – saying that we cannot be ‘super optimistic’ on the European economy.
Hence, it would be prudent to wait for a sustained buying before confirming that the pair might have touched a near-term bottom and before traders start positioning for any meaningful recovery as the focus now shifts to Friday’s important release of the advance US Q1 GDP report.
In the meantime, the USD price dynamics might continue to influence the price-action, through technical set-up favours some near-term consolidation/a modest technical bounce possibly towards testing the 1.1175-80 support break-point now turned resistance.
Valeria Bednarik, FXStreet’s own American Chief Analyst writes: “In the 4 hours chart, however, technical indicators maintain their strong downward slopes, with the RSI currently at around 19, indicating that sellers are not ready to give up. In the mentioned chart, the 20 SMA gains downward traction below the larger ones, currently at around 1.1205. The pair can correct up to this last with the correct catalyst, but bears will retain control and will be likely adding shorts at higher levels.”