EUR/USD recovered back toward resistance in European trading on Tuesday as the U.S. dollar broadly weakened against its major counterparts. Volatility has been declining in the pair since the sharp fall that was inspired by the last European Central Bank (ECB) meeting that took place in mid-May. Since then, the exchange rate has been consolidating within a narrowing range, which appears to be taking the form of a symmetrical triangle.

The larger time frames point to a similar technical outlook, as EUR/USD closed the month of June relatively unchanged to signal exhaustion from the prior bearish trend. Despite last month's price action, the pair recorded about a 5.25% loss in the second quarter. A horizontal level at 1.1641 was responsible for holding the pair higher on a monthly basis. The level previously acted as resistance in 2015 and 2016 as well as support in late 2017. On a daily chart, buyers have firmly defended the 1.1500 handle on two tests, and a significant bounce has materialized on each occasion.

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Positioning shifts as of late also suggest that euro bears may struggle to once again dominate. The Commitment of Traders report shows a significant covering of bearish dollar positions in the second half of June, while the net long euro position was cut drastically. The latest report indicated a net long of about 34 thousand contracts, down from a record 152 thousand contracts in late April. On an aggregate basis, the greenback is held net long in the futures market for the first time in a year.

Volatility is likely to remain subdued early in the week as the U.S. markets will be closed on Wednesday in observance of Independence Day. Later in the week, volatility is expected to pick up as the June U.S. Non-Farm payroll figures will be released on Friday. Analysts are expecting the unemployment rate to remain unchanged at 3.8% and average hourly earnings to hold at 0.3%.

Early last week, EUR/USD turned lower from a confluence of resistance that included the 20-day moving average, 200-period moving average on a four-hour chart, a horizontal level, as well as some Fibonacci resistance. The pair is currently seen testing the 20-day moving average once again and trades just below the 200-period moving average on a four-hour chart. A potential triangle pattern can be seen by connecting the highs from early last week and late last week. To the downside, a trendline can be drawn from this year's low of 1.1508.

In the event of an upside triangle breakout, the first level of resistance is found at 1.1714, which held the currency pair lower last week. The horizontal level confluences with the 61.8% Fibonacci retracement measured from the high printed during the June ECB meeting. Above it, the next level of resistance is found at 1.1741 as the level acted as support on several tests in June. Downside support falls at 1.1616, which has proven to be significant on a monthly chart. Further support is found at the lower bound of the triangle pattern.

The inversely correlated U.S. dollar index (DXY) has been battling overhead resistance, and recent price action emphasizes its importance. On a weekly chart, the 200- and 100-period moving average have come into play. The latter has been tested twice over the past two weeks, while there hasn't been a close above the former since it was originally tested in late May. Long upper wicks on the last two weekly candles signal strong selling pressure. On a monthly chart, the 20-period moving average is creating resistance at 94.91. Prior to the current test, the indicator had not been in play for about a year.