EUR/USD: Recovery falters at 1.0570 ahead of ECB

The recovery in EUR/USD loses steam as we head into mid-Europe, as investors gear up for the ECB policy decision for next direction on the EUR.

Over the last hours, the major staged a solid comeback from four-day troughs of 1.0525, and looks to test yesterday’ highs reached at 1.0576, mainly driven by a profit-taking rally, as markets clear out EUR short positions after three consecutive days of declines.

Moreover, negative tone on the European equities boosted the funding currency status of the Euro, offering some respite to the bulls.

Meanwhile, the treasury yields alongside the US dollar continue to consolidate yesterday’s extensive rally, as a calm sets into markets, with a few hours left for the highly anticipated ECB monetary policy decision and Draghi’s press conference.

EUR/USD Technical Levels

FX Strategists at UOB Group noted, “We indicated yesterday that ‘unless EUR can move and stay above 1.0610 by end of today, it is more likely that this pair has moved into a consolidation phase. EUR closed at 1.0540 and from here we expect this pair to trade sideways within a 1.0490/1.0590 range. EUR has been trading within a relatively narrow 1.0490/1.0680 range for about 3 weeks now and such prolonged consolidation could lead to a sharp ‘break-out’. At this stage, the downside appears to be more vulnerable and a clean and clear break below 1.0490 could lead to a rapid drop to 1.0450, 1.0400”.