EUR/USD: Euro shows its strength, ready to challenge the critical resistance at 1.2190

EUR/USD has been advancing amid upbeat PMIs and despite a souring market mood while Friday’s 4-hour chart is showing that the pair is nearing the 1.2190 strong resistance.

See: EUR/USD to test 1.20 amid Italian political stress – Westpac

Key quotes

“One reason to advance is Markit’s relatively upbeat Purchasing Managers’ Indexes figures for January, but they only marginally exceeded estimates. Moreover, the services sector is still contracting, reflecting the pain of the lockdowns.” 

“Investors are worried about the chances that President Joe Biden’s $1.9 trillion stimulus proposal fails to gain traction. Senate Republicans have their reservations. The final deal could be smaller or just be dragged. Biden will deliver a speech on the economy at 19:45 GMT and the media may provide details earlier.”

“Perhaps one of the factors underpinning the common currency is the European Central Bank’s decision. The ECB said that risks remain tilted to the downside, but that they are ‘less pronounced.’ While ECB President Christine Lagarde also emphasized the need for monetary support – and the policy remained unchanged – the marginally more upbeat sentiment may be boosting sentiment.” 

“Momentum on the 4-hour chart remains to the upside and euro/dollar is trending higher. It is now battling the convergence of the 100 and 200 SMAs around 1.2190 – which is the daily high. If EUR/USD breaks this critical resistance line, the next hurdle is 1.2220, which was a high point last week. Some support is at the daily low around 1.2150, followed by 1.2130 and 1.2080.”