Technical analysis: Levels to watch for EUR/USD in short term

The euro gained marginally against the dollar on Thursday after inflation numbers from Germany and France were released, but the bounce was limited below the upper barrier of the downside channel on the hourly chart, indicating the strength of the downward momentum in the near term.

EUR/USD bounced to 1.0627 from Wednesday's close of 1.0547 and off the 12-year low of 1.0494 hit earlier in Asia on Thursday.

On the higher side, a decisive break through 1.0666 is necessary to help turn Thursday's correction to a mild uptrend and then 1.0822 will become the focus point.

Beyond that barrier, the pair will aim 1.0987, where they were holding ahead of last Friday's US non-farm payrolls that has been the major fundamental driver of the recent euro selloff.

On the downside, 1.0593 has become a support line now ahead of the early Thursday low of 1.0494. The next important level south will be the 1.0210-1.0124 zone ahead of the historical parity.

The euro's new low on 12 March pushed the dollar index through the 100-mark to a new 12-year high of 100.5 before taking it back to 99.0 aided by the correction in the common currency.

CPI data on Thursday showed the consumer prices accelerated as expected in Germany in February, while it quickened soon than expected in France.

German CPI rose 0.1% on a year-on-year basis rebounding from the deflation reading of -0.4% in January. Month-on-month, the index rose 0.9% reversing the 1.1% decline at the start of the year.

French CPI rose 0.7% sequentially after the 1.1% drop in prices in January, and beating analysts' forecast of just 0.6% rise. The year-on-year deceleration eased to 0.3% from 0.4%, while the market had been expecting a repeat of the January number.