EUR/USD Forecast: Correcting Within A Broader Bullish Trend, German CPI & US GDP In Focus

On Tuesday, the US Dollar built on its modest recovery move from multi-week lows and was being supported by visible progress over the Republican-led tax reform legislation. Senate version of the bill was approved by the Budget Committee and paved the way for a floor vote as soon as Thursday, giving some positive boost to the greenback.

Meanwhile, the EUR/USD pair extended its retracement slide from Monday's over two-month highs and ended lower for the second consecutive session. The pair slipped back below the 1.1900 handle and took along some short-term trading stops placed at a previous strong resistance, now turned support, near the 1.1860 level. 

The pair has quietly recovered back to mid-1.1800s as investors now look forward to today's economic docket, featuring the key releases of prelim German CPI print for November and the first revision of the US Q3 GDP figures. Also in focus would be the outgoing Fed Chair Janet Yellen's testimony before Joint Economic Committee of Congress and pending home sales data from the US.

From a technical perspective, yesterday's break below the 1.1865-60 region pointed to the onset of a possible near-term corrective slide and hence, the pair seems more likely to head towards testing the 1.1800 handle, marking 38.2 percent Fibonacci retracement level of 1.1554-1.1961 upswing. A follow-through weakness has the potential to continue dragging the pair towards a confluence support near the 1.1760-55 region, comprising of 50-day SMA and 50 percent Fibonacci retracement level, which if broken would negate any near-term bullish bias.

Conversely, momentum back beyond the 1.1865-60 zone might now confront fresh supply near the 1.1900 handle, above which the pair could be back on track to dart towards the key $1.20 psychological mark.