- EUR / USD rises to new highs in the 1.2140 region.
- The preliminary German PMI and the manufacturing PMI for the euro area surprise to the upside.
- Preliminary PMIs, housing data and some speeches from the Fed stand out on the US economic calendar.
The common currency extends recent optimism and motivates the EUR / USD pair to recover above the key level of 1.2100 during the European session on Friday, reaching a new three-day high at 1.2141.
EUR / USD bullish on USD weakness
EUR / USD moves higher for the second day in a row on Friday due to the continuation of the downward correction in the US dollar.
Indeed, risk appetite sentiment picks up some cheer as investors shift their focus to reflation trade and palpable expectations of strong economic growth in the region, all backed by the acceleration of the launch of vaccines.
In addition, the common currency gains additional strength after the positive release of the preliminary PMIs for the manufacturing sector in the eurozone for the month of February. On the not-so-bright side, the service sector remains under pressure and continues to struggle amid the coronavirus pandemic.
During the American session, Markit will release its preliminary indicators for the manufacturing and service sector PMIs for the month of February, followed by existing home sales data and speeches by Richmond Fed Governor T. Barkin and the Boston Fed Governor E. Rosengren.
What can we expect around the EUR?
EUR / USD has rallied above the 1.2100 level after finding decent support in the 1.2020 region earlier in the week. However, the constructive outlook for the pair is expected to remain unchanged in the long term, always supported by the expectations of the reflation trade, the hopes of a strong recovery in the region (and abroad), which in turn is sustained on additional fiscal stimulus from the Fed and the ECB along with hopes of an acceleration in the launch of coronavirus vaccines. In addition, real interest rates continue to favor the euro area against the US, which is also another factor supporting the common currency along with the huge long-term positioning in the speculative community.
Eminent Background Topics: The appreciation of the EUR could trigger a verbal intervention by the ECB on inflation problems. The EU Recovery Fund. Italian politics. Large bullish positions in the speculative community.
EUR / USD technical levels
At the time of writing, the EUR / USD pair is gaining 0.42% on the day, trading at 1.2139. A break above 1.2169 (Feb 16 high), would target 1.2173 (23.6% Fibonacci retracement of the Nov-Jan move) en route to 1.2189 (Jan 22 high). On the downside, the next support is at 1.2023 (Feb 17 low), followed by 1.1996 (100-day SMA) and finally 1.1952 (Feb 5 low).
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