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Forex: EUR/USD holds above 1.3500, but is it time for bears?

After being unable to break above the 1.3600 frontier, the EUR/USD set back towards the 1.3500 area where the pair found some support. The euro managed to trim losses but the recovery was capped by the 1.3545 area. This way, the pair was confined to a range and a consolidation phase as investors refrain from taking big positions ahead of the ECB meeting.

As for the short term, currently the EUR/USD is trading at 1.3520 with the immediate support lying at 1.3494 (low Feb.6) followed by 1.3459 (low Feb5) and then 1.3415 (low Jan.29). On the upside, a climb beyond 1.3598 (high Feb.5) would aim for 1.3620 (intraday support Feb.4) and then 1.3660 (high Feb.4).

Is it time for bears? According to the Brown Brothers Harriman analysts, market could see a test of 1.3400 soon, "if EUR/USD holds 1.36, look to 1.3400." But as for real, investors are waiting for the ECB meeting and Draghi speech as president will give either a neutral or negative statement on 7% (or more than 1,000 pips) euro strengthening in the latest two months.

EUR/USD put in an interim top at 1.3710 last week, after the impressive 1,000 pips euro appreciation from November 13 low at 1.2660, "but any dips are likely to be limited by solid demand particularly from the real-money community," comments FXWW's analyst Sean Lee. "Tuesday’s lows at 1.3460 provide the obvious support levels. The EUR remains well supported against the GBP, AUD and JPY and deep dips in these pairs will also attract plenty of buyers."

The Big Day ahead

Investors will be busy on Thursday, where the biggest events would be the ECB meeting, the Australian unemployment report, the BoE MPC and the unemployment claims in the US.

- ECB Interest Rate Decision (Feb 07 12:45 GMT)
- BoE Interest Rate Decision (Feb 07 12:00 GMT)
- Chinese January Exports (Feb 08 01:00 GMT)

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