EUR/USD Forecast: Strength Beyond 1.18 Handle Likely To Short-lived, EZ PMIs Eyed

The EUR/USD pair fell to a 2-week low at the start of a new trading week and was weighed down by ongoing political uncertainty in Spain. However, a modest US Dollar retracement helped the major to extend overnight rebound from an intraday low level of 1.1725. With the US President Donald Trump indicating that he would make his choice very shortly, anxiousness over the appointment of the next Fed Chair seems to have prompted trader to lighten their bullish USD bets. 

Currently holding around 1.1765-70 band, traders now look forward to the flash Eurozone manufacturing PMI prints for some fresh trading impetus. The key focus, however, should remain on Thursday's key events - the highly anticipated ECB monetary policy decision and the Catalan Parliament meeting on how to respond to the central Spanish government's plan to take direct control of the region. 

From a technical perspective, the pair seems to be in the process of forming a descending triangle, with the 50-day SMA and the 100-day SMA defining the borders (resistance and support) of the triangular formation. However, with short-term indicators holding in neutral territory, the pair seems more likely to hold within a two-week old broader trading range and wait for a fresh catalyst before determining the next leg of directional move.

From current levels, the 1.1800 handle might continue to act as an immediate hurdle, above which a bout of short-covering could lift the pair towards 1.1845-50 heavy supply zone (the 50-day SMA). Conversely, a sustained break below the 1.1730-25 immediate support area could accelerate the fall even below the 1.1700 handle towards a strong horizontal support near the 1.1670-60 region.