(Amends high for recovery to 1.0443)

Feb 6 (Reuters) - There is a high probability EUR/USD drops into a lower range following the decisive break below that which dominated for almost two years.

EUR/USD spent much of the time within 1.05-1.10 in 2023 and 2024, with the low point in that period at 1.0448 far exceeded this year after the U.S. imposed tariffs on Mexico and Canada.

Although EUR/USD has swiftly rebounded from the resulting low at 1.0125 after those tariffs were delayed, which imply the sell-off was overdone, it may struggle to sustain strength above the base of the old range.

So far the recovery has reached 1.0443 which is below the low point of the two previous trading years on the back of short covering.

The two main reasons for the sell-off remain intact, with interest rate differentials set to widen further in favour of the U.S. currency, and risk aversion stemming from the trade dispute supporting it.

This should be more than enough to discourage traders from purchasing euros at what are now elevated levels.

While the swift reverse may deter sellers too, the significant break to the downside gives investors reason to hedge the risk that a lower range develops, perhaps 1.00-1.05.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own. Editing by Alison Williams)