EUR/USD comes under pressure following 2020 tops near 1.2100

Following earlier new 2020 highs in the 1.2090 region, sellers appears to have stepped in and motivate EUR/USD to correct lower to the mid-1.2000s on Wednesday.

EUR/USD propped up by risk appetite

EUR/USD posted the largest single day gain since March on Tuesday, advancing around 1.20% and extending the march north well past the psychological 1.20 hurdle. Earlier on Wednesday, EUR/USD reached fresh 2020 highs in levels just shy of 1.2100 the figure, area last seen in April 2018.

As usual in past weeks, the single currency met extra support from increasing investors’ appetite for riskier assets, in turn sustained by fresh US stimulus rumours and vaccine news.

In addition, Tuesday’s performance in EUR futures markets left the door open for the continuation of the uptrend, at least in the very near-term.

 Earlier in the calendar, the German Retail Sales expanded at a monthly 2.6% in October, surpassing expectations. In the broader Euroland, Producer Prices rose 0.4% MoM during the same period and the unemployment rate ticked lower to 8.4%.

In the US data space, the November’s ADP report is due seconded by weekly MBA’s Mortgage Applications, the EIA’s report on crude oil stockpiles, the Fed’s Beige Book and the second testimony by Chief Powell, this time before the Committee on Financial Services at the House of Representatives.

In addition, FOMC’s members R.Quarles, J.Williams and P.Harker are all due to speak later in the session.

What to look for around EUR

EUR/USD advanced to new YTD peaks around 1.2090 on Wednesday, leaving the door open to a potential test of the 1.2100 mark in the short-term horizon, always against the backdrop of a favourable atmosphere in the risk complex. In the very near-term, EUR/USD appears supported by prospects of a strong recovery in the region along with the increasing likelihood of extra stimulus in the US. Risks to this positive view emerge from the potential political effervescence around the EU Recovery Fund and increasing chances of further ECB easing to be announced as soon as at the December meeting.

EUR/USD levels to watch

At the moment, the pair is gaining 0.12% at 1.2053 and a break above 1.2087 (2020 high Dec.2) would target 1.2413 (monthly high Apr.17 2018) en route to 1.2476 (monthly high Mar.27 2018). On the flip side, immediate contention emerges at 1.1920 (high Nov.9) seconded by 1.1800 (low Nov.23) and finally 1.1745 (weekly low Nov.11).