- EUR / USD is losing ground and is targeting 1.2000.
- The rebound of the dollar weighs on the pair.
- Powell’s speech stands out on today’s economic calendar.
The selling pressure around the euro is extending another day this Thursday and dragging the EUR/USD to new daily lows in the region of 1.2030, specifically at 1.2027. At time of writing, the pair is trading above 1.2032, shedding 0.25% daily.
EUR / USD risks falling to 1.2000
The EUR / USD loses ground for the second day in a row due to persistent bullish momentum around the US dollar.
Indeed, reflation trade and vaccine optimism appear to have lost momentum as a major factor in risk appetite sentiment. In fact, the slowness of the launch of vaccines in the Old Continent (versus the US) threatens to dampen expectations of a strong economic recovery in the region.
What’s more, potentially higher inflation after additional fiscal stimulus planned by the Biden administration continues to fuel US yields and support the bullish momentum of the US dollar.
Regarding euro data, retail sales in the euro zone will be the only publication to highlight along with the unemployment rate, both figures for the month of January.
Across the Atlantic, the Fed Chairman, Jerome Powell, will participate in the event titled “Conversation on the United States Economy” at the Wall Street Journal Jobs Summit. During the American session, the initial unemployment colicitudes, unit labor costs, non-agricultural productivity and factory orders will also be published.
What can we expect around the EUR?
EUR / USD fails to achieve serious bullish traction and remains under pressure well below the 1.2100 level. The underlying bullish sentiment in the euro has weakened in recent sessions amid investors adjusting to possible US inflation and the consequent rise in yields and demand for the dollar. In the medium / long term, the outlook for the pair remains constructive due to expectations of additional fiscal stimulus in the US, real interest rates favor the euro area against the US and hopes of a solid economic rebound in the coming months.
Key events in the eurozone this week: Retail sales, unemployment rate (Thursday).
Eminent Background Issues: The appreciation of the EUR could trigger a verbal intervention from the ECB, always in the midst of the current (and future) context of moderate inflation. Possible political turmoil around the EU Recovery Fund. Big bullish positions in the speculative community.
EUR / USD technical levels
Immediate support is at 1.1991 (March 2 low), followed by 1.1976 (50% Fibonacci retracement of the November-January move) and finally 1.1952 (February 5 low). On the other hand, a break above 1.2136 (50-day SMA), would target 1.2243 (December 17 high) en route to 1.2349 (January 6 high).