EUR / USD falls below 1.1900

• EUR / USD has reversed sharply from the initial highs at 1.1950 and is back below 1.1900.
• Technical selling after the break of support at 1.1910 appears to have helped accelerate selling.
• Looking ahead, Wednesday’s FOMC meeting is the key event to watch out for.

The EUR/USD it has been on the defensive for the past few hours and has dropped below the 1.1900 level for the first time since last Wednesday. That marks a sharp reversal from the previous session’s highs at 1.1950, with the selling apparently exacerbated by a break of support at the 1.1910 area that had been in play since the beginning of the week. The pair is currently trading lower by about 0.2% or losing nearly 30 pips and the euro is now one of the worst performing currencies in the G10 on the day, being the best performer at one point in the European session.

Performance of the day

The euro’s outperformance was helped by a stronger-than-expected German ZEW survey for March. Summarizing; German ZEW economic sentiment rose to 76.6 in March from 71.2 in February, a larger jump than the expected rise to 74.0. Similarly, current conditions showed a higher than expected figure, rising to -61 from -67.2, although this is still well below pre-pandemic levels, which is not surprising given that Germany has been stuck in various degrees of blockage so far this year. ZEW commented that while the second lockdown has halted the recovery, its data does not suggest that there will be as drastic a drop in GDP in Q1 2021 as was experienced in the second quarter 2020 lockdown.

The gains were short-lived and at the beginning of the US session, the EUR / USD was testing the 1.1900 level and has since broken below it. The drop from early highs comes despite soft US data. US retail sales fell more than expected in February, but that mainly represents the waning momentum from January’s stimulus controls. Retail sales will no doubt pick up again in March after the government hands out another $ 1,400 to every American citizen. More worrisome was the larger-than-expected drop in industrial production in February; Analysts note that bad weather conditions last month contributed to the drop, but also note that global supply shortages also played a factor and this could be a longer lasting drag.

Perhaps traders / market participants have focused more on the flow of negative news coming from Europe about various EU nations taking unilateral steps to halt the launch of the AstraZeneca vaccine amid concerns that it could be linked to blood clots. blood, despite the central EU Health Authority (the European Medicines Agency or EMA) recommending the launch continues. According to the EMA, WHO and UK health authorities, there is no link between the vaccine and blood clots and it appears that further delays in the launch of the vaccine will cost more lives in the Eurozone, as well as further delay the economic reopening of the block and the subsequent economic recovery.

As for other outstanding news; ECB Executive Board member Frank Elderson was answering questions on Twitter and said inflation is likely to continue to rise in the coming months, although the ECB believes this is mainly due to transitory factors that they will “look at.” On the other hand, the FT reported that the EU is looking to propose “digital green certificates” to allow EU citizens to start traveling back within the bloc; EU citizens will get a green certificate if they are vaccinated, they can show that they have recently recovered from Covid-19 or have recently been tested and received a negative result.

Ahead of tomorrow’s FOMC meeting, which is the main event of the week as far as EUR / USD is concerned, the trade is likely to become more consolidated.