EUR/USD stuck below 1.18, where to next?

Following a failed attempt to hold above the 1.18 mark, the EUR/USD pair is spending the first half of the NA session in a narrow band below that level. As of writing, the pair was trading at 1.1790, gaining 20 pips, or 0.15%, on the day.

Despite this recent fluctuation, the pair seems to be stuck in a 40-pip range amid a quiet economic calendar. The greenback, which has been driving the pair's price action lately, looks relatively calm on Monday. Following last Friday's NFP-led rally, the US Dollar Index is virtually flat on the day at 93.35. 

• US Dollar struggles for direction near 93.30, Fedspeak eyed

Today's data from Germany, which revealed that the industrial production contracted by 1.1% on a monthly basis in June after expanding 1.2% in May, made it difficult for the shared currency to find demand during the European session. Tomorrow, the only data that could impact the euro strength will come from Germany when it releases its trade balance data for June. A contraction in the trade surplus could weigh on the euro as the recent bullishness of the currency is likely to be assessed as a factor contributing to lower exports.

Later in the day on Tuesday, investors will watch the U.S. sentiment data from the NFIB and the IBD/TIPP. Although these data don't generally impact the greenback's value against its rivals, better-than-expected results could allow the DXY to extend its gains. 

Technical outlook

The initial hurdle for the pair aligns at 1.1800 (psychological level). A daily close above that level could allow for further gains towards 1.1905 (Aug. 2 high) and 1.1975 (Jan. 5, 2015, high). However, the RSI on the daily graph is moving further away from the 70 handle, suggesting that the bullish momentum is fading away. On the downside, supports could be seen at 1.1730 (Aug. 4 low), 1.1690 (20-DMA) and 1.1615 (Jul. 26 low). 

• EUR/USD back to neutral from bullish – UOB