Stages mild recovery above 1.0550, upside potential seems limited

• EUR/USD hovers around 1.0565 amid the USD weakness, lower US bond yield.
• The pair holds below the 100- and 200-hour EMAs; the RSI indicator is located in bearish territory under 50.
• The first resistance level is located at 1.0580; 1.0522 acts as the initial support level.

The EUR/USD pair recovers some lost ground above the mid-1.0500s during the early European session on Friday. The lower US Treasury bond yields drag the US Dollar (USD) lower, which acts as a tailwind for the EUR/USD pair.

On Thursday, the European Central Bank (ECB) decided to leave interest rates unchanged as widely expected. ECB President Christine Lagard said that the fact that the central bank holds rates doesn’t mean that they will never hike again. Lagarde further stated that the risks to economic growth remain tilted to the downside.

According to the four-hour chart, the EUR/USD pair holds below the 100- and 200-hour Exponential Moving Averages (EMAs), suggesting the path of least resistance is to the downside. It’s worth noting that the Relative Strength Index (RSI) is located in bearish territory under 50, which supports the sellers in the near term.

The first upside barrier for the major pair is located near the 100-EMA at 1.0580. Any follow-through buying above the upper boundary of Bollinger Band of 1.0660 will see the rally to 1.0694 (high of October 24), followed by 1.0735 (high of September 20).

On the other hand, 1.0522 acts as the initial support level for EUR/USD. The key contention level is seen at the 1.0500-1.0505 region, portraying the confluence of the lower limit of the Bollinger Band and a psychological round figure. A decisive break below the latter will see a drop to 1.0450 (a low of October 4).

EUR/USD four-hour chart