EUR/USD Forecast: Likely to consolidate ahead of Thursday’s ECB meeting

The EUR/USD pair once again managed to find decent support near the 1.1530-25 horizontal zone and regained positive traction at the start of a new trading week. The pair rallied back above the 1.1600 handle and recovered a major part of the post-NFP slide, albeit lacked any strong follow-through. Worries over Italian budget eased after Economy Minister Giovanni Tria’s comments on Sunday, saying that the progressive measures will only be implemented gradually, and was seen lending some support to the shared currency.

This coupled with a goodish US Dollar retracement, primarily on the back of a rally in the British Pound, sparked by Brexit hopes, provided an additional boost and lifted the pair to an intraday high level of 1.1617. The up-move seemed losing steam during the US trading session, albeit a subdued USD price action helped limit any meaningful downside. Currently hovering around the 1.160 handle, traders now look forward to the release of German ZEW survey results for some fresh impetus. 

From a technical perspective, a descending triangular formation on the short-term chart clearly indicates that the near-term selling bias might still be far from over. However, technical indicators have started gaining some positive momentum, suggesting a limited downside. A combination of diverging factors points to a range-bound price action ahead of this week's key event risk - the ECB monetary policy meeting on Thursday.

Hence, any meaningful up-move seems more likely to remain capped at the triangle resistance, currently near the 1.1625-30 region. However, convincing breaks through the mentioned hurdle will invalidate the bearish formation and prompt some aggressive short-covering move towards reclaiming the 1.1700 handle en-route 1.1730-35 supply zone.

On the flip side, weakness back below 1.1580-75 area might continue to find some fresh buying near the 1.1530-25 region, which if broken would mark a fresh bearish breakdown and turn the pair vulnerable to resume with its prior depreciating move.