EUR/USD: headed back to recent highs on 1.25 handle?

With the US markets closed for Presidents Day today, and China out, it is a slow start to the week and prices are likely to be contained within Friday's ranges while the dollar was able to recover some lost ground to close the week.

EUR/USD was in a bearish key reversal last week due to the DXY's rebound from 50% of its 2011-17 rise at 88.25. EUR/USD closed at 1.2405 from 1.2554 highs.  The dollar was able to recover on the back of profit taking when yields dropped (despite inflationary data) and stocks picked up on Wall Street. 

EUR/USD to remain well supported

Analysts at Rabobank explained that they are of the view that the USD will be able to gain ground against a number of high yielding currencies over the medium-term.  "However, we expect that the strength of Eurozone fundamentals will mean that EUR/USD remains well supported," the analysts added. 

Meanwhile, analysts at Nomura explained that they expect economic activity in the eurozone to remain well above trend in 2018 and well above consensus. 

Economic activity in eurozone to remain well above trend in 2018 - Nomura

EZ PMI's and FOMC minutes are in focus this week. For Friday's session, the Fed fund futures yields price a total of four hikes by end-2019.

EUR/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that shorter term, the pair is at risk of correcting further lower, as it broke below its 20 SMA: "Technical indicators are crossing into negative territory with strong downward slopes. The 100 SMA stands around the mentioned 1.2390 region, reinforcing the relevance of the support."