The US Dollar did get a minor lift, although remained near a three-year low after the US Senators struck a deal to keep the government funded through Feb. 8. The EUR/USD pair, however, had a muted reaction and extended it’s sideways consolidative move around mid-1.2200s as investors seemed reluctant to place aggressive bets ahead of Thursday's ECB monetary policy decision.
Ahead of the key event risk, the shared currency might get influenced by today's release of the German ZEW economic sentiment and might help traders to grab some short-term trading opportunities. Meanwhile, the latest German political development, wherein SPD ends a deadlock and votes for coalition talks with Merkel, might continue to underpin the shared currency and limit any immediate sharp downslide.
Technically, the 1.2300 handle has been acting as a near-term ceiling for the pair and the range-bound price action seems more likely to get extended ahead of the key event risk.
Having said that, a convincing move beyond the 1.2300 handle would mark a fresh bullish breakout and with short-term indicators still holding in bullish territory, the pair seems all set to test 1.2355-60 supply zone before eventually darting towards the 1.2400 handle.
On the flip side, the 1.2220-10 region might continue to protect the immediate downside, which if broken might drag the pair back towards the lower end of its one-week old trading range support, near the 1.2175-65 zone. A follow-through selling pressure might turn the pair vulnerable to break below the 1.2100 handle and head towards 1.2070-65 horizontal support.
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