- EUR / USD corrects lower after another attempt at the 1.2000 level.
- Lagarde, president of the ECB, says higher yields are ahead of economic recovery.
- Initial jobless claims, the Philadelphia Fed Manufacturing Index and the CB Leading Indicator Index all stand out on today’s economic calendar.
The common currency resumes the fall and dragging the EUR / USD pair once near the 1.1950 region at the start of the European session on Thursday.
EUR / USD remains capped around 1.2000
EUR / USD returns to negative territory after another failed attempt to retest the 1.2000 psychological region following the FOMC event on Wednesday.
The pair regained traction and approached the 1.20 barrier on Wednesday after the pessimistic message of the FOMC event, where President Powell once again reaffirmed the Fed’s ultra-accommodative stance and suggested that rates will remain at current levels until the end of 2023.
Closer to home and at the beginning of the session, the President of the ECB, Christine Lagarde, has indicated that the increase in yields is ahead of the economic recovery instead of following the (temporary) episodes of inflation. Additionally, Lagarde expects a solid rebound in the second half of the year thanks to the launch of the vaccine and easing of restrictions.
During the European session, the vice-president of the ECB, Luis De Guindos, and the member of the council, Isabel Schnabel, have a speech scheduled. On the other side of the Atlantic, weekly jobless claims, the Philadelphia Fed Manufacturing Index and the CB Leading Indicator Index are expected to be released.
What can we expect around the EUR?
EUR / USD once again encountered stiff resistance near the 1.20 psychological hurdle. The strong and persistent stance of the dollar in recent weeks has put the earlier constructive view of the euro under scrutiny, as market participants continue to adjust to higher US yields and the superior performance of the US economy. However, the firm hand of the ECB (despite some verbal concerns) in combination with the expected rebound in economic activity in the region in the post-pandemic stage will likely prevent a much deeper pullback in the pair.
Eminent Background Issues: Possible action by the ECB to slow the rise in European yields. The appreciation of the EUR could trigger a verbal intervention by the ECB, especially in the future context of moderate inflation. Possible political turmoil around the EU Recovery Fund. There is still a large bullish positioning in the speculative community.
EUR / USD technical levels
At the time of writing, the EUR / USD pair is down 0.28% on the day, trading at 1.1944. The next support is at 1.1882 (March 16 low), followed by 1.1840 (200-day SMA) and finally 1.1835 (March 9 low). On the other hand, a breakout of 1.1989 (March 11 high) would target 1.2070 (50-day SMA) on its way to 1.2113 (March 3 high).
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