EUR/USD leaps to fresh 2-day highs beyond 1.1200

  • EUR/USD gathers extra pace and retakes the 1.1200 mark.
  • The greenback retreats markedly after Fed eases further.
  • Italian inflation figures came in below estimates in February.

The single currency has started the week on a firm fashion and is now lifting EUR/USD to fresh 2-day highs above the key barrier at 1.1200 the figure.

EUR/USD stronger post-Fed

EUR/USD managed to regain poise after Friday’s close in the 1.1100 neighbourhood - area coincident with the critical 200-day SMA - and it has regained the 1.200 mark and above during the European morning on Monday.

The moderate selling pressure in the dollar re-emerged after the Federal Reserve caught markets off guard once again and reduced the FFTR by and extra 100 bps to 0.0%-0.25% on Sunday. The Fed also announced QE and extra measures to keep the liquidity flowing in the system.

In the meantime, the advance of the COVID-19, particularly in Italy, Spain, the UK and the US, remains in the centre of the debate for the time being along with measures from the major central banks in order to mitigate the impact of the virus outbreak in the economy.

In the docket, Italian inflation figures tracked by the CPI showed consumer prices contracted 0.1% inter-month in February and rose 0.3% from a year earlier, both prints coming in short of expectations. Later across the pond, the New York Empire State index is due for the month of March.

What to look for around EUR

EUR/USD managed to pick up pace and retake the 1.1200 barrier and beyond on the back of the resumption of the selling bias in the greenback, particularly after the Fed’s move on rates on Sunday. The pair has therefore left behind part of the downside sparked after the ECB expanded QE and announced extra liquidity measures at its meeting last week. On the macro view, recent better-than-expected results in both Germany and the broader Euroland appear to have re-ignited some optimism among investors regarding the possibility of some recovery in the region and the currency. This view is also supported by latest news of fiscal stimulus in Germany. However, the developments around the coronavirus and its impact on the economy are expected to keep ruling the sentiment in the near-term, including the likeliness of extra easing by the ECB, which could cast some doubts over the pair’s potential upside.

EUR/USD levels to watch

At the moment, the pair is gaining 0.86% at 1.1199 and a break above 1.1236 (high Mar.16) would target 1.1495 (2020 high Mar.9) en route to 1.1514 (high Jan.31 2019). On the flip side the next support is located at 1.1057 (55-day SMA) followed by 1.0992 (monthly low Jan.29) and finally 1.0814 (78.6% Fibo of the 2017-2018 rally).

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