EUR / USD closed comfortably above 1.2100, saved by the wave of dollar weakness

• It was a rough day, but the EUR / USD finally ended above the 1.2100 level.
• The USD experienced weakness during US trading hours as risk appetite improved.

It was a hectic final trading day of the week for the EUR/USD; The pair declined during the first hours of European trading, falling below its 21-day moving average at the 1.2100 level and touching lows near 1.2080 before a wave of USD weakness caused the pair to rally above 1.2100 and close to 1.2120. As the weekend approaches rapidly, trading volumes decline and price action is likely to remain very subdued. On the day, the pair is trading around 0.1% or 10 pips lower.

So, looking at the USD side of the equation; No news or particular topics can be pinpointed to explain Friday’s price action with certainty. However, in general terms, markets remain optimistic given the expectations of a strong global economic recovery that will begin in the coming months. Vaccine launches continue and positive data is coming in (most recently from Israel) showing that vaccines are working well to prevent disease and transmission. Herd immunity will allow countries affected by Covid-19 to reopen aggressively later in the year and expectations are that economic activity, particularly in service sectors that people have not been able to use for most of the past year, will increase. .

The boom is expected to be further accelerated by the unprecedented levels of fiscal and monetary stimulus that have been injected into the world economy over the past year (particularly in the US, where Congress is expected to pass more stimulus soon. ). Meanwhile, a very dovish US Federal Reserve appears determined to scrutinize any major improvement in economic conditions and allow the economy to accelerate to meet its elusive employment and inflation targets.

Given the above and the fact that this week’s new flow has only served to strengthen those expectations, risk assets continue to perform very well; The S&P 500 rallied to close at record highs, indicative of strong global equity markets, while commodities, nominal bond yields (the US moved above 1.20% on Friday) and inflation expectations also continue to rise. However, real US bond yields remain low, given the promise of continued Fed support. Expectations for a global recovery, strong risk assets and low real yields are NOT a good match for the US. American dollar. As long as the markets continue to celebrate as they are now, the USD will remain vulnerable to further sell-offs.

Technical Levels