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Following a shy attempt to break down the 1.3040 level, the EUR/USD recovered to 1.3080 in the American session, but the bullish intention wasn't strong enough and the pair traded back in a congestion pattern centered in the region of 1.3050/60

The EUR/USD is closing 0.15% down on the day at 1.3061. Next support levels are located at 1.3030 (lower Bollinger) en route to 1.3020 (low January 7) and then 1.2998 (low January 4). On the flip side, advances beyond 1.3096 (high January 9) would aim to 1.3140 (high January 8) and finally 1.3141 (MA10d).

Continuing through on a break below the 1.3100 psychological figure, "EUR/USD has stalled prematurely above support via the 1.3020 figure," analyst Richard Lee comments. "Any further downside is contingent on a downside violation of the 1.3020, which would activate downside tests at the 1.2962 barrier."

Nevertheless, the UBS team affirms that a EUR/USD consolidation should be temporary. "The EUR/USD rate consolidated from recent highs due to the release of the December Fed meeting minutes, at which some members have challenged the planned time frame of the current quantitative easing policy," they explain. "We think the EUR/USD consolidation should be temporary and expect the ECB to re-assure that it will do anything to keep the euro stable. So a near term rebound of EUR/USD is quite likely."

Banks And Earnings

Thursday's docket is on sight: big day for the euro, as the ECB will hold its monthly gathering. Nonetheless, market participants expect the volatility in EUR/USD to come from President Draghi's rhetoric, as expectations for a rate cut are almost non-existent.

Not much excitement is expected from the first ECB and BoE monetary policy meetings of 2013, "as the majority of economists believe both central banks will remain on hold this month," says Katarzyna Komorowska, analyst. "Nevertheless, there are some doubts concerning ECB's action, as Mario Draghi hinted in December at a possibility of another rate reduction."

"With speculation heightened over a potential interest rate cut in the near term, there is a lot of attention being placed on tomorrow's ECB rate decision," notes Lee. "And, although there is plenty of economic data to support such a move, there is always the chance that things could play out differently."

On the other side of the Atlantic, investors were focused on earnings season. U.S. shares were trading in the positive ground on Wednesday for the first time after two consecutive sessions closing in red. The spark was initiated by Alcoa (NYSE:AA), which posted revenues above estimates and a better prospect for the present year.

Curiously, Alcoa finished 0.22% down on the day, but the Dow Jones rose 61.66 points, or 0.46% to finish at 13,390.51. The S&P 500 added 3.87% points, or 0.27% to 1,461.02. The Nasdaq Composite advanced 14 points, or 0.45% to 3,105.81.

Other events to pay attentions are the UK monetary policy decision, claims in the United States, and housing in Canada.

Source: Forex: EUR/USD Trapped At 1.3050/60 Ahead Of Banks