EUR/USD has been range-bound since the beginning of the U.S. session on Wednesday as it failed to break out of the range when the unemployment claims report was released at 8:30 am Thursday morning.

The pair found support at its lower bound of 1.3625.   It was tested three times without significant penetration in the past two days and the pair managed to rebound each time. 

The low was first made Wednesday around 12:30 pm EST.

It was then tested at 2:30 am EST on Thursday as China's inflation data weighed on global markets.  Investors are wary of how the Chinese government may respond, as policy makers already hiked the bank reserve ratio twice in 2010.

The low was tested again Thursday morning about 45 minutes after the release of U.S. unemployment claims.

The upper bound is 1.3680, the Wednesday high made at 11:00 am EST. 

The pair briefly broke through the level Thursday morning after the U.S. unemployment report was released.  However, it quickly gave back the gains, dropping from a high of 1.3686 to as low as 1.3625 at 9:10 am EST.

EUR/USD failed to break through because the unemployment report was underwhelming.  Unemployment claims declined by 6,000 from the previous week to 462,000 while economists surveyed by Bloomberg expected 460,000.

The pair is likely to stay range-bound to finish the week unless U.S. retail sales and consumer sentiment deviate substantially from expectations or if China announces a policy change to combat inflation. 

The Federal Reserve will announce its federal funds rate and issue its statement on Tuesday of next week.  Should the Fed not reiterate its expectation for keeping its key interest rate low for an extended period, EUR/USD will exhibit great volatility and break to the downside.