EUR/USD heads higher

The dollar weakened broadly during the New York session and fell versus most competitors after the global central banks remained on hold at today's monetary policy announcements. The euro advanced, moving off recent lows sub-1.300, after the ECB held its interest rates steady. In the subsequent conference, ECB President Mario Draghi said that even though the decision was not unanimous, the ECB never precommits. Draghi also sounded optimistic by saying the economy will gradually recover and played down the Italian elections effects on the eurozone. Comments from Draghi alongside better-than-expected US jobless claims helped to boost the EUR/USD which rose above 1.3100 for first time in a week. So what's ahead for the EUR/USD after the ECB? Tomorrow's US jobs report should provide some direction for FX markets heading into next week. "As the week has progressed the here been some improvement in market sentiment, helping to support gains in U.S. European equities and many foreign currencies", says Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank. "Should the U.S. jobs report show a solid gain tomorrow the commodity and emerging currencies could rise further, though we are more cautious on prospects for the euro, yen and pound". Euro rises to 1.3100. Could it hold gains? After today's rally, EUR/USD technical indicators have turned positive in the short-term supporting a steeper correction. However, as hourlies reach overbought levels and ahead of the NFP report, the cross will likely see a period of consolidation before another leg higher. The EUR/USD would still need to regain the 1.3160 area (Feb 28 high) in order to challenge the broader bearish bias. On the downside, a break below 1.2965 (March 1 & 6 double bottom) would expose the 1.2900/08 zone (psychological level/ Fib 76.4% of 1.2660/1.3710). Commenting on today's EUR/USD advance, Christopher Vecchio, Currency Analyst at DailyFX says that the rally could be short-lived, especially if tomorrows US Nonfarm Payrolls report for February lives up to the hype (+170K expected). "The growing divergence between the Euro-zone and US economies will be too apparent to keep the EURUSD bid on President Draghi’s 'hopes' for an economic recovery, despite no new policies on either the fiscal or monetary side that would indicate otherwise", he comments. Meanwhile, on a wider view, TD Securities analysts note that if the market takes today's ECB tone too strongly, we could once again find ourselves in a replay of January-February, where Euribors and euro move so much that the ECB must then take another dovish tack to keep market expectations in check. "1.3150-1.3200 is a key risk area for EUR/USD as a push through there would likely bring more upside risk", TD team says.