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  • EUR/USD meets solid resistance in the vicinity of 1.2150.
  • ECB’s Panetta, Lagarde will speak later in the session.
  • US January’s CPI, Powell next of relevance in the docket.

The European currency extends the upbeat tone so far this week and lifts EUR/USD to weekly highs in the mid-1.2100s, where a decent barrier appears to heve emerged.

EUR/USD bid on risk appetite, looks to ECB, data

EUR/USD adds to Tuesday’s gains and looks to consolidate the recent breakout of the key barrier at 1.2100 the figure, always underpinned by the firm sentiment surrounding the riskier assets.

The moderate sell-off in the greenback has been sustaining the rebound in EUR/USD from last week’s YTD lows near 1.1950 pari passu with the move lower in US yields and the pick-up of the reflation trade.

In the domestic docket, final German inflation figures showed consumer prices tracked by the CPI rose at a monthly 0.8% during January, matching the preliminary readings. Later on Wednesday, ECB’s Lagarde will participate at an event organized by The Economist and Board Member Panetta will participate in an online seminar.

Data across the pond highlight the release of the CPI and Core CPI, also for the month of January. In addition, Chief Powell is due to speak on the “State of the US Labor Market”.

What to look for around EUR

EUR/USD seems to have met decent contention in the YTD lows around 1.1950 (February 5). The ongoing bounce off that area 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: Lagarde will speak on Monday and Wednesday. German final January CPI (Wednesday).

Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Italian politics. Huge long positions in the speculative community.

EUR/USD levels to watch

At the moment, the index is gaining 0.02% at 1.2119 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 other and, immediate support emerges at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1706 (200-day SMA).