EUR/USD flirts with 1.0600 ahead of German data

The EUR/USD pair manages to hold onto previous gains, after the euro staged a solid comeback on ECB’s less dovish policy outcome. Markets believe that the ECB may be on track to plan its exit from the easy policy, as the central bank noted, “We believe that today’s press conference still puts the ECB on track for an upgrade of the risk assessment –and a change to its forward guidance– later in the year.”

Moreover, a weaker tone seen around the US dollar versus its main competitors, in wake of profit-taking, adds to the strength in EUR/USD. THE USD index trades -0.10% lower at 101.88, looking to extend yesterday’s sell-off amid positions unwinding ahead of the crucial US employment data.

However, the gains seem capped as the US treasury yields continue to trade higher amid risk-on rally in the equities and better outlook on the upcoming US jobs report, against the back drop of a potential Fed rate hike seen next week.

The immediate focus now remains on the German trade balance and Euro group’s ECOFIN meetings for fresh impetus on the Euro.

EUR/USD Technical Levels

Valeria Bednarik, Chief Analyst at FXStreet, noted, “The immediate resistance to take care of is the 1.0630 region, as selling interest has contained rallies around it for over three weeks. Should the pair break above it, 1.0660 is the next resistance, en route to the 1.0700/20 region, where the pair has also multiple daily highs and the 38.2% retracement of the post-US election slide.”

“To the downside, 1.0520 is the first support to break to confirm a bearish extension, followed by 1.0490. A break below this last should trigger stops and fuel the slide, with the market then targeting the 1.0420/40 region. A weekly close around this last, will leave doors open for a retest of the multi-year low set last January at 1.0340,” Valeria added.