EUR/USD outlook: Bulls looking to seize control, German/US CPI eyed for fresh impetus

• A broad-based USD selling bias pushed EUR/USD to near two-week tops on Wednesday.
• The underlying bullish sentiment was seen as a key factor weighing on the safe-haven USD.
• Investors look forward to the release of German/US CPI prints for a fresh trading impetus.

The EUR/USD pair gained strong positive traction on Tuesday and recovered further from two-month lows, around mid-1.1900s touched last week. The momentum pushed the pair further beyond the 1.2100 mark, to near two-week tops during the Asian session on Wednesday and was exclusively sponsored by the emergence of some heavy selling around the US dollar. Friday's rather unimpressive US jobs report raised doubts about a relatively faster US economic recovery and halted the recent USD bounce from multi-year lows.

Apart from this, the underlying bullish sentiment in the financial markets further undermined the safe-haven USD. The global risk sentiment remained well supported by the progress in coronavirus vaccinations, which, along with prospects for a massive US fiscal spending plan, has been fueling hopes for a strong global economic recovery. With the USD selling bias turning out to be an exclusive driver, concerns that the slow rollout of vaccines in the eurozone could hamper the economic recovery did little to hinder the ongoing positive move.

Meanwhile, investors remain divided about the impact of the US President Joe Biden's proposed $1.9 trillion stimulus package on the greenback. Hence, a modest bounce in the US Treasury bond yields failed to impress the USD bulls. The pair was last seen hovering around the 1.2125-30 region as market participants now look forward to the release of the final German CPI and French Industrial Production figures for some impetus. The US economic docket highlights the release of the latest consumer inflation figures.

Traders will further take cues from the broader market risk sentiment, the US stimulus headlines, and the US bond yields. This, in turn, might influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term Technical Outlook

From a technical perspective, a sustained move back above the 1.2055-60 horizontal support-turned-resistance was seen as a key trigger for bullish traders. A subsequent strength beyond the 1.2100 mark, representing the 38.2% Fibonacci level of the 1.2350-1.1952 recent fall, and a near one-month-old descending trend-line resistance has set the stage for additional gains. That said, any further positive move is likely to confront resistance near 50% Fibo. level, around mid-1.2100s.

This makes it prudent to wait for some strong follow-through buying beyond the mentioned barrier before positioning for the resumption of the prior/well-established short-term bullish trend. The pair might then aim to surpass an intermediate hurdle, near the 1.2190-1.2200 supply zone (coinciding with the 61.8% Fibo level), and test the next relevant resistance near the 1.2275 region ahead of the 1.2300 round-figure mark.

On the flip side, the 1.2100 mark now becomes immediate support to defend. A convincing break below might prompt some technical selling and accelerate the fall towards the 1.2070 intermediate support en-route the 23.6% Fibo. level, around the 1.2045 zone. Some follow-through selling will negate any near-term positive bias and turn the pair vulnerable. The downward trajectory might then drag the pair back towards the key 1.2000 psychological mark, before bears eventually aim to challenge the recent swing lows, around mid-1.1900s.