- EUR/USD advances to the 1.2130 region on Monday.
- Upside in the pair remains capped by the 1.2150 region.
- EMU’s Industrial Production, Trade Balance come up next.
The single currency starts the week on the positive side and lifts EUR/USD to the 1.2140/45 band.
EUR/USD looks to data, risk trends
EUR/USD fades Friday’s small pullback and resumes the upside on Monday, although gains remain well capped by the mid-1.2100s for the time being. This area is coincident with the 55-day SMA (1.2141) and lies ahead of a Fibo level (of the November-January rally) at 1.2173.
In the meantime, investors continue to look to the risk appetite trends as the main driver of the price action in the global assets, with the reflation trade and the pick-up in the vaccine rollout in the Old Continent in the centre of the debate.
Later in the session, EMU’s Industrial Production and Trade Balance figures will take centre stage along with the EuroGroup meetings.
What to look for around EUR
EUR/USD still faces a tough barrier in the mid-1.2100s. The rebound from 2021 lows near 1.1950 (February 5) follows the constructive outlook for the pair in the longer run and is always supported by prospects of the reflation trade, hopes of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB along with hopes of an acceleration in the vaccine rollout. In addition, real interest rates continue to favour the euro area vs. the US, which is also another factor supporting the EUR along with the huge, long positioning in the speculative community.
Key events this week in Euroland: December’s Industrial Production (Monday). EMU’s Advanced Q4 GDP and German ZEW survey (Tuesday). ECB Accounts (Thursday) and German, EMU flash PMIs on Friday.
Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Huge long positions in the speculative community.
EUR/USD levels to watch
At the moment, the index is gaining 0.17% at 1.2139 and a break above 1.2144 (weekly high Feb.10) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22). On the downside, the next support lines up at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1725 (200-day SMA).
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