MOA-2006-BLG-074 was selected as one of the most promising planetary candidates in a retrospective analysis of the MOA collaboration: its asymmetric high-magnification peak can be perfectly explained by a source passing across a central caustic deformed by a small planet. However, after a detailed analysis of the residuals, we have realized that a single lens and a source orbiting with a faint companion provides a more satisfactory explanation for all the observed deviations from a Paczynski curve and the only physically acceptable interpretation. Indeed the orbital motion of the source is constrained enough to allow a very good characterization of the binary source from the microlensing light curve. The case of MOA-2006-BLG-074 suggests that the so-called xallarap effect must be taken seriously in any attempts to obtain accurate planetary demographics from microlensing surveys.