EUR/USD retreats from 2-1/2 year highs, still comfortable above 1.20 mark

The EUR/USD pair extended its recent positive momentum and surged through the 1.20 psychological mark for the first time since January 2015. 

The prevalent bearish sentiment around the greenback, with the key US Dollar Index tumbling to 2-1/2 year lows near mid-91.00s amid had been one of the key factors behind the pair's strong up-move on Tuesday. 

Meanwhile, escalating geopolitical tensions, following N. Korea's latest ballistic missile launch on Tuesday enhanced the shared currency's status as a funding currency and collaborated to the up-move.

   •  N. Korean Ambassador: US should be fully responsible for the catastrophic consequences it will entail

Meanwhile, possibilities of some big stops being triggered on a decisive break through the 1.20 handle further aggravated the move and collaborated to the pair's sharp upsurge since early European session.

The pair touched an intraday high level of 1.2070 but has now retreated around 35-40 pips from tops and is currently trading around 1.2035-30 band as traders now look forward to the release of Conference Board's Consumer Confidence Index from the US for some fresh impetus.

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Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "there are no signs that the pair may change course, nor fundamental nor technical, although a downward corrective movement towards Monday's high in the 1.1980 region can't be dismissed. Anyway, some consolidation could be expected ahead of another leg lower, with an extension beyond 1.2060 now favoring a test of the mentioned 1.2101."

"Buyers will likely surge on a decline towards the 1.1960/80 region, with a break below it favoring a deeper correction down to 1.1900/20 where the next line of buyers stands now" she added further.