EUR/USD retreats from 1.2160, holds above 1.2100

• Euro consolidates post ECB gains, DXY holds onto losses.
• Volatility rises in EUR/USD that remains in recent range.

The EUR/USD peaked after the beginning of the American session at 1.2160 the highest level since Monday. Afterwards, it pulled back finding support slightly above 1.2100. As of writing, it trades at 1.2120, up 40 pips for the day.

Despite the increase in volatility, the European Central Bank meeting and US data, EUR/USD held within the recent range. The central bank, as expected, kept rates unchanged and announced an increase in the emergency purchase program. The euro appreciated at a modest pace across the board.

“EURUSD remains firm in the wake of the December decision, but we see this more as a result of broader USD weakness than from the ECB’s policy actions. Investors still have a long list of risks to navigate before year-end, however, leaving plenty of opportunities for a break out of recent ranges”, explained analysts at TD Securities.

Regarding US data, the key number on Thursday was the jump in initial jobless claims to 853K, significantly above the 725K expected. It is the highest number since mid-September and showed the labor market is still under pressure.

The DXY trimmed losses over the last hours. It bottomed at 90.65, the lowest in six days, before rebounding toward 90.90. US yields are modestly lower and equity prices in Wall Street in mix territory. The rally in crude oil prices contributes to improving market sentiment.

From a technical perspective, the EUR/USD continues to consolidate amid increasing volatility. On the upside, the 1.2150/60 area continues to be a critical resistance. A break above would lead to a test of the recent top at 1.2177. On the flip side, 1.2070 is a level to consider; a daily close below would clear the way to more losses.

Technical levels