• EUR/USD regains positive traction on Tuesday amid the emergence of some USD selling.
• The technical set-up favours bullish traders and supports prospects for additional gains.
• A sustained break below mid-0.9800s is needed to negate the near-term positive bias.

The EUR/USD pair attracts some dip-buying near the 0.9870 area on Tuesday and reverses a part of the previous day's slide to a multi-day low. The pair maintains its bid tone through the early European session and is currently placed near the daily high, around the 0.9925-0.9930 region.

A goodish recovery in the global risk sentiment prompts some selling around the safe-haven US dollar, which, in turn, is seen offering some support to the EUR/USD pair. That said, worries about a deeper global economic downturn should limit deeper losses for the buck. Investors might also prefer to move to the sidelines ahead of the crucial FOMC policy decision on Wednesday.

From a technical perspective, the post-ECB rejection slide from the 100-day SMA stalls near the confluence resistance breakpoint comprising a four-month-old descending trend-line and the 50-day SMA. The said resistance-turned-support, currently around the 0.9880-0.9870 region, should now act as a pivotal point and determine the next leg of a directional move for the EUR/USD pair.

Meanwhile, oscillators on the daily chart are holding in the positive territory and support prospects for a further appreciating move. Hence, a subsequent strength back towards testing the overnight swing high, around the 0.9965 region, remains a distinct possibility. The momentum could get extended and allow the EUR/USD pair to aim back to reclaim the parity mark.

On the flip side, the 0.9880-0.9870 region might continue to protect the immediate downside ahead of the mid-0.9800s. A convincing break below will shift the bias in favour of bearish traders and make the EUR/USD pair vulnerable. The downward trajectory might then drag spot prices below the 0.9800 round figure, towards the next relevant support near the 0.9770 area and the 0.9700 mark.

EUR/USD daily chart

Key levels to watch