EUR / USD remains under pressure near 1.2120, focus is on US data and yields

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  • EUR / USD is under pressure and falls back to the 1.2120 region.
  • The dollar rebounds from lows supported by higher yields.
  • Data from the US PCE stand out on today’s economic calendar.

After hitting recent highs above 1.2240 on Thursday, the common currency has come under selling pressure and dragged the EUR / USD pair to the 1.2120 region during the European session on Friday.

EUR / USD weaker on USD bounce, focus is on US data.

EUR / USD reverses two consecutive daily rises, hitting new multi-week highs around 1.2240 on Thursday, and returns to the 1.2120 region during the European session on Friday.

The sharp and sudden rally in yields of the US 10-year benchmark it has led investors to favor the US dollar, at least in the very short term.

Meanwhile, reflation trading remains the almost exclusive driver of EUR / USD price action and the broader risk universe, helped by the firmer deployment of vaccines in the Old Continent and the firm recovery of the economy global in the coming months.

Regarding euro data, it is expected that the France CPI to contract 0.1% month-on-month in February, while Spanish consumer prices will contract 0.6% compared to the previous month. In addition, the European Council ends its two-day meeting.

On the other side of the Atlantic, today will be released the inflation figures measured by the PCE (the Fed’s preferred indicator), personal income / expenditure data, advanced results of the trade balance and the final reading of the sentiment of the consumer from the University of Michigan for the month of February.

What can we expect around the EUR?

The EUR / USD rally finally broke the 1.2200 barrier, although the move lost steam in the 1.2240 region on Thursday. Underlying bullish sentiment in the euro remains under pressure for the time being amid investors adjusting for potential US inflation and consequent rising 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 versus the US, and expectations of a solid economic rebound in the coming months.

Key events in the eurozone this week: Meeting of the European Council (Thursday and Friday). Lagarde will participate in the G-20 meeting of central bank governors and finance ministers on Friday.

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 shedding 0.35% on the day, trading at 1.2125. Immediate support is at 1.2097 (21-day SMA), followed by 1.2023 (Feb 17 low) and finally 1.2016 (100-day SMA). On the upside, a breakout of 1.2243 (December 17 high) would target 1.2349 (January 6 high) on its way to 1.2413 (April 17, 2018 high).

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