- EUR / USD challenges the 2021 lows in the 1.1980 region.
- EMU retail sales expanded 2% month-on-month in December.
- Initial US claims increased by 779,000 WoW, less than expected.
Sellers keep good control of sentiment around the shared currency and force the EUR/USD to stay close to the area of the annual lows in the 1.1980 zone.
EUR / USD weaker by buying USD
EUR / USD remains well on the defensive, losing ground on Tuesday, always following the improving mood around the dollar, which in turn remains supported by rising US yields.
Also contributing to the weakness of the euro, the EUR / GBP operates at levels last seen in mid-May 2020 in response to the strong rebound in demand for the British pound following the Bank of England meeting.
At the beginning of the euro calendar, Retail Sales in the euro block expanded 2.0% monthly in December, beating the initial consensus. Across the pond, weekly claims rose less than expected during the week ending January 30, by 779,000.
The economic agenda will close with December factory orders and advanced unit labor costs along with non-farm productivity, both during the fourth quarter. Additionally, M. Daly from the FOMC will also give statements.
What to look for around EUR
EUR / USD accelerates downward and eventually breaks below the 1.2000 mark. While the outlook for the pair turned bearish in the very short term, it remains constructive in the long term and is always supported by the prospects for a strong recovery in the region (and abroad), which in turn is supported by fiscal stimulus from the Fed and the ECB. Furthermore, real interest rates continue to favor the euro area against the US, which is also another factor supporting the euro along with the huge long-term positioning in the speculative community.
At the moment, the index is falling 0.44% to 1.1983 and faces initial support at 1.1976 (50% Fibonacci from the November-January rally) seconded by 1.1956 (100-day SMA) and finally 1.1887 (61.8% Fibonacci from the November-January meeting ). On the other hand, a breakout above 1.2113 (55-day SMA) would target 1.2189 (weekly high on Jan 22) en route to 1.2272 (weekly high on Dec 17, 2020).