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The EUR/USD finally closed at 1.2970 after bouncing barely 20 pips from December's low at 1.2950. A modest short covering boost following the 135 pips late in the session collapsed from 1.3085 early in the session.

The euro weakened sharply on Thursday and broke below the 1.3000 psychological level versus the dollar after the ECB decided to leave rates unchanged but lowered its growth and inflation forecasts. Additionally, President Draghi said that policy makers considered cutting interest rates. The "pessimistic outlook on Europe's growth potential is making it difficult for traders to be bullish on the euro," comments Richard Lee, FXstreet.com's analyst. "The sentiment has traders and technicians eying 1.2900 as the next viable support barrier."

In the short term, the bias has turned to the downside for the cross, with 1.2950 as immediate support. Once below that, the pair could accelerate toward 1.2900. On a wider view, the pair is staging a fresh pullback within its broader 1.2660/1.3170 range, where it has traded since early September. The pair now needs to regain the 1.3000 mark to ease the bearish pressure.

In the middle term, the Bank of Tokyo Mitsubishi UFJ team believes that the EUR/USD forecast ahead looks neutral. They believe that the euro is struggling for direction like most other currencies heading into year-end, with EUR/USD still consolidating between 1.27-33.

On the other side, the TD Securities team argues that since Draghi noted the ECB's "wide discussion" on rates today, we've seen the EUR trek lower, slipping below 1.30, bunds bull steepen, and the July eonia forward rate turn negative as further cuts look increasingly likely. "We may see the moves in rates extend further, as markets have more time to mull over the implications of today's ECB's meeting," the team adds.

Focusing On Non-Farm Payrolls

The U.S. Department of Labor is scheduled to release the November employment report with its so-called Non-Farm Payrolls numbers. Market expectations are around 93,000 payrolls on balance in November. FXstreet.com's Lee believes that "traders should expect an above 90-95,000 release to lend some support for the U.S. dollar across the board."

FXstreet.com analyst Katarzyna Komorowska states that analysts are divided. "The majority opts for a result in the range of 101-150K, which is considerably below the previous reading of 171K. They also believe the unemployment rate should stay unchanged at 7.9% or tick up slightly to 8%," Komorowska points out.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: The EUR/USD Closes At 1.2970 After Modest Recovery From December's Lows