- EUR/USD loses the grip further and breaches 1.2100.
- The dollar rebounds sharply in line with higher yields.
- The U-Mich index is next on tap in the US calendar.
The single currency now comes under further selling pressure and forces EUR/USD to break below the 1.2100 mark and clinch fresh 3-day lows.
EUR/USD weaker on USD-strength
EUR/USD so far reverses three daily advances in a row in response to the moderate bounce of the greenback, all amidst the broader profit taking mood among market participants.
In fact, yields of the key US 10-year reference manage to re-visit the area above 1.18% and pushes the buck to 3-day highs to the 90.70 region when gauges by the US Dollar Index (DXY).
Earlier in the session and in the euro docket, final CPI in Spain came in flat on a monthly basis during January and rose 0.5% over the last twelve months.
In the NA session, the advanced reading of the February US Consumer Sentiment tracked by the U-Mich index will take centre stage later on Friday.
What to look for around EUR
EUR/USD faces a tough barrier in the mid-1.2100s so far this week. The rebound from last week’s lows near 1.1950 follows the constructive outlook for the pair in the longer run and is always supported by prospects of the reflation trade, hopes of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB along with hopes of an acceleration in the vaccine rollout. 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.
Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Italian politics. Huge long positions in the speculative community.
EUR/USD levels to watch
At the moment, the index is losing 0.33% at 1.2088 and faces immediate contention at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1719 (200-day SMA). On the other hand, a break above 1.2144 (weekly high Feb.10) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22).
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