- EUR/USD challenges the 2021 lows in the 1.1980 region.
- EMU’s Retail Sales expanded 2% MoM in December.
- US Initial Claims rose by 779K WoW, less than expected.
Sellers remain well in control of the sentiment around the shared currency and force EUR/USD to stay close to the area of YTD lows in the 1.1980 zone.
EUR/USD weaker on USD-buying
EUR/USD remains well on the defensive and sheds further ground on Tuesday, always following the improved mood around the greenback, which stays in turn supported by higher US yields.
Also collaborating with the weakness in the euro, EUR/GBP navigates levels last seen in mid-May 2020 in response to the strong pick-up in the demand fot the sterling in the wake of the BoE meeting.
Earlier in the euro calendar, Retail Sales in the euro bloc expanded at a monthly 2.0% in December, surpassing initial consensus. Across the pond, weekly Claims rose less than forecast during the week ended on January 30, by 779K.
Closing the docket come up next December’s Factory Orders and advanced Unit Labor Costs and Nonfarm Productivity, both during the fourth quarter. In addition, FOMC’s M.Daly is also due to speak.
What to look for around EUR
EUR/USD accelerates the downside and finally breaks below the 1.2000 mark. While the outlook for the pair shifted to bearish in the very near-term, it remains constructive when comes to the longer run and is 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 index is retreating 0.44% at 1.1983 and faces initial support at 1.1976 (50% Fibo of the November-January rally) seconded by 1.1956 (100-day SMA) and finally 1.1887 (61.8% Fibo of the November-January rally). On the flip side, a break above 1.2113 (55-day SMA) would target 1.2189 (weekly high Jan.22) en route to 1.2272 (weekly high Dec.17 2020).