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After being unable to break above the $1.3600 frontier, the EUR/USD set back towards the $1.3500 area where the pair found some support. The euro managed to trim losses but the recovery was capped by the $1.3545 area. This way, the pair was confined to a range and a consolidation phase as investors refrain from taking big positions ahead of the ECB meeting.

As for the short term, currently the EUR/USD is trading at $1.3520 with the immediate support lying at $1.3494 (low February 6) followed by $1.3459 (low February 5) and then $1.3415 (low January 29). On the upside, a climb beyond $1.3598 (high February 5) would aim for $1.3620 (intraday support February 4) and then $1.3660 (high February 4).

Is it time for bears? According to the Brown Brothers Harriman analysts, markets could see a test of $1.3400 soon, "if EUR/USD holds $1.36, look to $1.3400." However, investors are waiting for the ECB meeting and, particularly, ECB chief Mario Draghi's speech for any hint on the recent 7% euro strengthening in the latest two months.

EUR/USD put in an interim top at $1.3710 last week following an impressive 1,000 pips euro appreciation from November 13 low at $1.2660, "but any dips are likely to be limited by solid demand particularly from the real-money community," comments FXWW's analyst Sean Lee. "Tuesday's lows at $1.3460 provide the obvious support levels. The EUR remains well supported against the GBP, AUD and JPY and deep dips in these pairs will also attract plenty of buyers."

The Big Day ahead

Investors will be busy on Thursday, where the biggest events would be the ECB meeting, the BoE MPC and the unemployment claims in the US.

Source: EUR/USD Holds Above $1.3500, But Is It Time For Bears?