- EUR/USD gives away part of Monday’s gains to 1.1950.
- The dollar looks steady amidst lack of upside traction in yields.
- Powell’s testimony will take centre stage later in the session.
The single currency faces some selling pressure and forces EUR/USD to leave behind the area of recent tops in the proximity of 1.1950.
EUR/USD looks to dollar, Powell
EUR/USD fails to extend Monday’s advance and now faces some selling pressure in the 1.1900 neighbourhood ahead of the opening bell in the Old Continent on turnaround Tuesday.
The offered bias in the greenback allowed the pair to rebound from the 1.1870 region on Monday, although the upside run out of steam in the mid-1.1900s. The steady performance of US yields encouraged sellers to return to the markets, with yields of the US 10-year note so far limited by the 1.70% mark.
Later in the session, the Italian Industrial Sector will in the limelight ahead of the speech by ECB’s Board member A.Enria.
However, all the attention will be on the US calendar, where Chairman Powell will testify on “Coronavirus Aid, Relief, and Economic Security Act” before the House of Representatives. Additionally, FOMC’s Bullard, Bostic, Barkin and Brainard are also due to speak.
In the US data space, New Home Sales and the Richmond Fed Index will see the light as well.
What to look for around EUR
EUR/USD keeps the consolidative/bearish theme unchanged and still supported by the critical 200-day SMA near 1.1850. The persistent solid stance in the greenback has been undermining the previous constructive view in the pair in the past weeks, as market participants continue to adjust to higher US yields and the outperformance of the US economy (vs. its G10 peers). However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair.
Key events in the euro area this week: Advanced PMIs for the month of March, flash Consumer Confidence (Wednesday) – European Council meeting (Thursday and Friday).
Eminent issues on the back boiler: Potential ECB action to curb rising European yields. EUR appreciation could trigger ECB verbal intervention, especially amidst the future context of subdued inflation. Probable political effervescence around the EU Recovery Fund.
EUR/USD levels to watch
At the moment, the index is losing 0.14% at 1.1897 and faces the next support at 1.1870 (weekly low Mar.22) seconded by 1.1849 (200-day SMA) and finally 1.1835 (2021 low Mar.9). On the other hand, a breakout of 1.1989 (weekly high Mar.11) would target 1.2053 (50-say SMA) en route to 1.2113 (monthly high Mar.3).
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