The US Dollar pared early losses, with the EUR/USD pair once again failing ahead of the 1.2300 handle and reversing a modest weekly bullish gap. Investors took a relatively calm view of a US government shutdown, which took effect at midnight on Friday after the Senate failed to pass a last-minute deal to fund the government operations through February 16th.
The greenback continues to find some support from the ongoing upsurge in the US Treasury bond yields and has now dragged the pair back to the 1.2200 neighborhood. Despite a good two-way move, the pair remains within a familiar trading range, held over the past one-week or so. Investors seemed to refrain from placing aggressive bets and preferred to wait for the next fundamental trigger - ECB monetary policy decision, before committing to the pair's next leg of directional move.
Meanwhile, the price action now suggests that a near-term ceiling might already be in place near the 1.2300 handle. Hence, it would be prudent to wait for a clear break through the mentioned barrier before anticipating any further appreciating move in the near-term. In absence of any major market moving economic releases, the pair might extend its near-term consolidative phase ahead of this week's key event risk.
From current levels, the 1.2000 handle, closely followed by the 1.2185 region, marking 38.2% Fibonacci retracement level of 1.1916-1.2323 recent upsurge might continue to protect the immediate downside. Failure to hold these immediate support levels might prompt some additional near-term weakness towards 50% Fibonacci retracement level support near the 1.2120-15 region.
On the flip side, mid-1.2200s might now act as immediate resistance but the key major upside hurdle remains near the 1.2295-1.2300 region, which if conquered should pave the way for an extension of the pair's bullish trajectory even beyond 3-year highs resistance near the 1.2325 region, and 1.2365-70 barrier, towards reclaiming the 1.2400 handle.
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