- EUR / USD is consolidating around 1.1950.
- The pair has largely ignored eurozone fundamentals, adjusting instead to the dynamics of the US dollar.
The EUR/USD it is consolidating around the 1.1950 level as volumes decline ahead of the weekend. That puts the pair around the midpoint of the trading range for the day; The EUR / USD started the session at 1.1985, but the strength of the USD caused the pair to drop as low as 1.1915. On the day, the pair seems ready to close with losses of around 0.25% or around 30 pips, but on the week that means the pair has still recovered by around 50 pips (or 0.4%).
Euro adjusts to dollar flows, ignores euro zone updates
There has been a lot of Eurozone related news to keep up with on Friday; Industrial production data for January was much stronger than expected, but the news about the pandemic has been bad (concerns in France and Germany about an upcoming third wave and Italy returning to lockdown) and the ECB is leaking sources to the press. as if there is no tomorrow (although nothing too important was leaked on Friday, and the ECB was basically frustrated by the slow implementation of the EU Recovery Fund).
Rather, the pair has traded primarily based on the dynamics of the US dollar; Initially, the dollar traded on US government bond yields, rallying along with them during the Asia Pacific session and in the European morning – optimism from the US fiscal stimulus (as well as fears of which could lead to an overheating of the US economy) was touted as a boost to yields.
But the dollar’s fortunes changed in the wake of an impressive Canadian labor market report that gave the CAD a big boost, and this massive boost apparently came primarily at the expense of the US dollar rather than its other G1 counterparts. This helped the EUR / USD to recover to 1.1950.
Looking ahead, US retail sales on Tuesday, followed by the FOMC’s monetary policy decision on Wednesday, will be the key events in the United States to watch for next week. Next week’s data schedule is lighter in the euro zone, so focus is likely to return to the worsening state of the pandemic, as well as the ongoing setbacks that the bloc’s vaccine launches continue to face.
Technical levels
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