EUR/USD reverses early gains to one-month high, Draghi in focus

The EUR/USD pair reversed all of its early gains to over one month high level beyond 1.0700 mark and turned mildly negative during early European session.

Currently hovering around 100-day SMA immediate support, near the 1.0675-70 region, a modest greenback recovery seems to be key factor for the pair's retracement from the highest level since Feb. 7. In fact, the key US Dollar Index has bounced off sub-101.00 mark and seems to have prompted some profit taking following the pair's recent up-move of nearly 200-pips in just three trading sessions.

However, a follow through retracement in the US treasury bond yields, led by disappointment from a tepid average hourly earnings growth, seems to have limited any further sharp downslide for the major. 

Moreover, a Bloomberg report on Friday that revealed the European Central Bank (ECB) had discussed whether it could raise interest rates before ending its monthly quantitative easing program also seems to be lending some support to the shared currency. Hence, investors will remain focused on ECB President Mario Draghi’s speech, due later on Monday. 

However, persistent political uncertainty, in wake of the upcoming Presidential election in France, seems to hold investors back from initiating and holding long-Euro positions. 

Meanwhile, repositioning trade, ahead of this week's key event risk - the FOMC meeting, might continue to fuel volatility and provide some impetus for short-term traders.

Technical outlook

Carol Harmer, Founder at charmertradingacademy.com notes, ""med term we are overbought....this is on the daily charts 60 mins also overbought...so we could see a retrace back to 10620 area and this is where we can go in and buy the Eu-ro....stops will be tight...below 10580 and we are out looking for 10520 where we are going in once more...Now as I said retracement should hold 10620/10580...below here there is scope for us to trade lower"