EUR/USD forecast: Range play intact ahead of Euro-zone PMIs

The EUR/USD pair had a good two-way price action on Friday and finally ended the day in the red, snapping two weeks of a positive move. The pair initially ticked higher, but once again met with some fresh supply near the 1.1070 region following the release of German Produce Prices, which contracted by 0.5% in August and rose a modest 0.3% over the last twelve month - both missing consensus estimates. The intraday downtick accelerated further in the wake of some renewed pick up in the US Dollar demand amid reviving safe-haven demand.

Confined in a multi-week trading range

News that five Yemeni civilians were killed in airstrikes by the Saudi-led coalition soured investor appetite. The already weaker sentiment deteriorated further after reports suggested that the US President Donald Trump was not interested in making a "limited" trade deal with China. This was followed by news that Chinese officials unexpectedly cancelled a visit to the US farms following two-day negotiations in Washington and further weighed on the sentiment.
 
Despite the pullback, the pair continued showing some resilience at lower levels and remained confined well within a broader trading range held over the past two weeks or so. The pair held steady just above the key 1.10 psychological mark through the Asian session on Monday as market participants now look forward to the preliminary Euro-zone PMI prints for September.
 
The German and the composite Euro-zone Manufacturing PMI are expected to improve slightly and come in at 44.00 and 47.3, respectively, still remain in the contraction territory. Given that the market has already digested the recent ECB decision to restart the QE program from November, any positive surprise might be enough to provide a goodish lift to the shared currency and prompt some aggressive short-covering move around the major.

Short-term technical outlook

From a technical perspective, nothing has changed much and the pair still needs to decisively breakthrough a near three-month-old descending trend-line hurdle to increase prospects for any meaningful near-term recovery. Above the mentioned barrier, near the 1.1070 region, a fresh bout of short-covering has the potential to lift the pair beyond the 1.1100 round-figure mark, and the 1.1145 intermediate resistance, towards challenging 100-day SMA near the 1.1175 region en-route the 1.1200 handle.
 
On the flip side, bearish traders are likely to wait for a sustained weakness below the 1.10 handle before positioning for any subsequent slide back towards challenging 2019 swing lows support near the 1.0925 region. A follow-through selling might now turn the pair vulnerable to break below the 1.0900 round-figure mark and head towards testing its next major support near the 1.0840-35 region.