EUR/USD extends profit-taking slide, back below 1.0900 handle

The EUR/USD pair extended its retracement move from yearly tops and slipped below the 1.0900 handle, currently probing daily lows near 1.0885 level. 

Spot eroded over 50% of previous session's up-move amid modest greenback recovery. In fact, the key US Dollar Index has now moved within striking distance of reclaiming the 99.00 handle and seems to be the key factor prompting traders to take some profit off the table, especially after the post-French election up-surge of over 200-pips.

Meanwhile, receding risk-on trade, as depicted by retreating German and the US treasury bond yields, further weighed on the shared currency and collaborated to the pair's pull-back from the highest level since Nov. 10.

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The latest leg of profit-taking slide could also be attributed to some position readjustment ahead of the keenly awaited tax reforms announcement by the US President Donald Trump and tomorrow's ECB monetary policy decision. 

There are no macroeconomic data due for release on Wednesday and hence, the pair remains at the mercy of the yield dynamics and Trump's tax plan, expected to be announced later during the day.

Technical levels to watch

A follow through selling pressure now seems to abate near the very important 200-day SMA support near 1.0840 region, which if broken could extend the corrective slide even below weekly lows support near 1.0820 level, and the 1.0800 handle, towards testing a previous resistance, now turned support, near 1.0775-70 region.

On the upside, sustained recovery back above the 1.0900 handle now seems to confront resistance near 1.0925-30 region, above which the pair is likely to aim back towards retesting multi-month tops resistance near mid-1.0900s.