- EUR/USD sees a V-shaped reversal just above the 1.2100 level.
- Risk tone recovery alongside the European equities, downs the USD.
- US CB Consumer Confidence data and stimulus updates in focus.
Fresh bids emerged near 1.2110, allowing a quick rebound in EUR/USD to test the 1.2150 level, as the price now consolidates the uptick ahead of the key US economic data.
The risk sentiment witnessed a major turnaround, as the European equities embarked upon a recovery mode after a mixed start on the session. The pan-European benchmark, the Euro Stoxx 50 rallies 1% so far, lifting the overall market mood while weighing on the safe-haven US dollar. The risk-recovery also helps the futures tied to the S&P 500 index trim losses, now trading around 3,840 levels.
Ahead of the European open, the main currency pair extended Monday’s bearish sentiment and fell as low as 1.2108, as the US dollar gained ground amid intensifying risk-off mood, thanks to the US fiscal stimulus deadlock and renewed US-China tensions over the South China Sea.
From a broader perspective, the euro is likely to remain pressured amid deteriorating business sentiment in the Old Continent amid new covid strain contagion-led lookdown extensions in key economies. Germany's IFO Expectations index fell to 91.1 in January, missing the estimates of 93.2.
The EUR bulls also remain cautious amid the Italian political uncertainty, as attention turns towards the US CB Consumer Confidence data due later in the NA session on Tuesday.
EUR/USD technical levels
“A clear break of 50-day SMA, currently around 1.2120, becomes necessary for the sellers to keep the helm. Following that, the 1.2100 threshold will be in focus. In a case where the EUR/USD bears dominate past-1.2100, a seven-week-old horizontal area near 1.2060/50 will be the key. Alternatively, EUR/USD buyers will look for an entry on a daily break above the 21-day SMA level of 1.2191,” FXStreet’s Analyst Anil Panchal notes.
EUR/USD additional levels
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