EUR/USD looks flat in the mid-1.2100s ahead of data, ECB

The single currency extends the side-lined theme for yet another session and motivates EUR/USD to gyrate around the 1.2150 region in the second half of the week.

EUR/USD appears supported near 1.2130

EUR/USD remains under mild pressure in the lower bound of the weekly range near 1.2130, all against the backdrop of some consolidation in the FX universe.

In fact, yields of the US 10-year reference appears to have met strong hurdle in the 1.18% area (Tuesday), sparking a corrective downside soon afterwards. In addition, market participants continue to gauge the recent dovish tone from some ECB-speakers.

It is worth recalling that ECB’s Lagarde said on Wednesday that the central bank is closely following the performance of the exchange rate and in particular its impact on the region’s inflation.

In the docket, the ECB will release its Accounts (Minutes) of the latest monetary policy meeting, while Initial Claims and the participation of Fed’s Powell in an streamline event while be in the limelight across the pond.

What to look for around EUR

The upside momentum in EUR/USD run out of steam in the 1.2350 area earlier in the month. In spite of the corrective downside, the outlook for EUR/USD remains constructive and appears supported by prospects of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB. In addition, real interest rates continue to favour the euro area vs. the US, which is also another factor supporting the EUR along with the huge, long positioning in the speculative community.

EUR/USD levels to watch

At the moment, the pair is losing 0.05% at 1.2150 and faces the next support at 1.2132 (weekly low Jan.11) seconded by 1.2058 (weekly low Dec.9) and finally 1.2032 (23.6% Fibo of the 2017-2018 rally). On the flip side, a break above 1.2349 (2021 high Jan.6) would target 1.2413 (monthly high Apr.17 2018) en route to 1.2476 (monthly high Mar.27 2018).