The US Dollar slipped against its rivals on Thursday and helped the EUR/USD pair to stage a goodish rebound from 1-1/2 week lows. Sliding US Treasury bond yields helped offset softer than expected German Ifo surveys and turned out to be the only factor influencing the pair's momentum.
Meanwhile, the ECB's January meeting minutes showed that policymakers expressed a preference for dropping easing bias but held the view that it was too early to change the central bank's forward guidance. Against the backdrop of hawkish FOMC meeting minutes, the minutes showed increasing policy divergence between the two central banks and capped any additional gains.
The pair struggled to build on overnight recovery move and has now retreated back to the 1.2300 handle as market participants now look forward to the German fourth quarter GDP print and the final Euro-zone CPI prints. Even a slight disappointment, especially from the inflation figures, might now prompt some aggressive selling and turn the pair vulnerable to extend its corrective slide over 3-year tops, set last Friday.
From a technical perspective, the pair remains poised to break below 1.2260 intermediate support and head towards testing the 1.2200 handle, marking the neckline support of a bearish double-top chart pattern formation on daily chart. However, a sustained recovery back above mid-1.2300s would negate the bearish bias and trigger a near-term short-covering bounce towards reclaiming the 1.2400 handle.
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