EUR/USD climbs to session highs near 1.2140, focus on US data

• EUR/USD regains traction near the 1.2140 zone.
• The risk-on mood returns to the markets on Friday.
• German flash GDP expanded 0.1% QoQ in Q4.

The European currency now reverses the initial pessimism and pushes EUR/USD back to the 1.2140 region, or daily highs, on Friday.

EUR/USD focused on risk trends, data

EUR/USD now adds to Thursday’s gains and extends the optimism sparked in the second half of the week. Indeed, the pair manages well to rebound from sub-1.2100 levels and re-focus on the key resistance area in the 1.2180/90 band.

The renewed bias towards the riskier assets continue to weigh on the dollar and therefore lends extra support to the euro and its peers.

Earlier in the session, the German advanced GDP figures showed the economy is expected to have expanded 0.1% inter-quarter in Q4 and to have contracted 2.9% on a yearly basis. Still in Germany, the Unemployment Change shrunk by 41K in January and the jobless rate stayed put at 6.0% vs. expectations for an uptick to 6.1%,

Across the ocean, the PCE is due followed by Personal Income/Spending, Pending Home Sales and the final gauge of the U-Mich index for the month of January.

What to look for around EUR

The corrective downside in EUR/USD met contention in the 1.2060 region so far this week. The near-term outlook for the pair looks tilted towards some consolidation, although it appears constructive in the longer run and always supported by prospects of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB. 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.

EUR/USD levels to watch

At the moment, the pair is up 0.09% at 1.2131 and a break above 1.2171 (21-day SMA) would target 1.2189 (weekly high Jan.22) en route to 1.2349 (2021 high Jan.6). On the flip side, the next support is located at 1.2058 (weekly low Jan.27) seconded by 1.2053 (2021 low Jan.18) and finally 1.1976 (50% Fibo of the November-January rally).