EUR/USD trims strong recovery gains, Draghi in focus

The EUR/USD pair ran through fresh offers and has now trimmed some of its gains to session peak level near mid-1.0600s.

Currently trading around 1.0630-35 region, a broad based greenback retracement, as measured by the overall US Dollar Index,  helped the pair to stage a strong recovery from over 11-month lows touched on Friday and near-term oversold conditions. Further recovery, however, was restricted amid rising bets for an eventual Fed rate-hike action. CME group's FedWatch Tool is pointing to over 95% probability of such as action in December and continues to underpin the greenback.

Meanwhile, emergence of political risks in Italy and France is further weighing on the shared currency.  In case of additional unease over political situations in the Euro-zone, the pair is likely to turn vulnerable to continue drifting lower in the near-term.

Later during NY trading session, ECB President Mario Draghi's testimony about the European Central Bank's Annual Report before the European Parliament will be looked upon for fresh impetus. However, the broader trend remains dependent on USD price dynamics led by Fed rate-hike expectations and hence, this week's FOMC meeting minutes would be the next big trigger for the pair's next leg of directional move. 

Technical levels to watch

Sustained move above 1.0650 resistance (session peak) is likely to trigger a fresh bout of short-covering and assist the pair towards its next major hurdle near 1.0700-10 area. On the downside, renewed weakness below 1.0600 handle, leading to a subsequent drop below 1.0585 support, would turn the pair vulnerable to extend its near-term downward trajectory immediately towards 1.0540-35 support area.