EUR/USD Forecast: Likely To Consolidate Ahead Of Thursday's ECB Decision

Meanwhile, the US Dollar steeped out of the spotlight amid receding fears about a trade war stemming from US President Donald Trump's proposed tariffs on imported steel and aluminium, with political developments in the Euro-zone influencing the EUR/USD pair's movement on the first trading day of an extremely busy week.

The pair initially weakened below the 1.2300 handle and was being weighed down by the outcome of Sunday’s elections in Italy, which resulted in a hung parliament. However, an expected grand coalition deal between Merkel’s Conservatives and the SPD extended some support and helped the pair to finally end the day with modest gains, above the 1.2300 handle. 

The pair continued gaining some positive traction, for the fourth consecutive session on Tuesday and is currently place around the 1.2360 supply zone. In absence of any major market moving economic releases, investors might now start repositioning for this week's key event risks - ECB monetary policy decision and the keenly watched US monthly jobs report (NFP). 

From a technical perspective, any subsequent up-move is likely to confront resistance near the 1.2400 handle. With short-term indicators holding in neutral territory, suggesting indecisive directional bias, the pair seems more likely to consolidate in range and wait for the next big catalyst before establishing the next leg of directional move. 

On the downside, weakness back below 1.2325 level might continue to find some buying interest near the 1.2300 handle and is followed by a strong support horizontal support near the 1.2270 area. Only a decisive break-through the mentioned supports would prompt some fresh selling and turn the pair vulnerable to head back toward retesting the 1.2200 handle.