- EUR/USD is down smalls and gyrate around the 1.19 level.
- France’s Industrial Production expanded 3.3% MoM in January.
- US inflation figures will take centre stage later in the NA session.
The single currency struggles to extend Tuesday’s recovery and prompt EUR/USD to hover around the 1.1900 neighbourhood so far on Wednesday.
EUR/USD appears so far supported around 1.1830
Following Tuesday’s drop and subsequent strong rebound from new yearly lows near 1.1830, EUR/USD now finds it difficult to extend the bullish attempt further north of the 1.1900 mark.
Steady US yields prompt some consolidation in the global markets and motivate the buck to fade the earlier bull run to session tops in the 92.20/25 band when measured by the US Dollar Index (DXY).
The macro scenario continues to be dominated by investors’ expectations of higher US inflation in the next months along with the better performance of the US economy vs. its G10 peers. The (asymmetric) vaccine rollout, in the meantime, keeps playing a crucial role in sustaining the economic recovery.
Data wise in Euroland, France’s Industrial Production expanded at a monthly 3.3%, surpassing initial estimates. However, the key event will be the publication of US inflation figures gauged by the CPI for the month of February. The latter gained in relevance in past weeks in response to the planned higher fiscal spending under the Biden’s administration.
What to look for around EUR
EUR/USD recorded new 2021 lows in the vicinity of 1.1830 region on Tuesday, although it managed to stage a moderate rebound afterwards. The solid rebound in the greenback as of late put the previous constructive stance in the euro under heavy pressure, as market participants continue to adjust to higher US yields and the outperformance of the US economy. A move below the critical 200-day SMA (around 1.1815) should shift the pair’s outlook to bearish in the near-term. In the meantime, price action around EUR/USD is expected to exclusively gyrate around the dollar’s dynamics, developments from yields on both sides of the ocean, extra fiscal stimulus in the US and the global economic recovery.
Key events in Euroland this week: ECB interest rate decision/Press Conference/Economic Projections (Thursday) – EMU’s Industrial Production (Friday).
Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always amidst the current (and future) context of subdued inflation. Potential political effervescence around the EU Recovery Fund. Huge long positions in the speculative community.
EUR/USD levels to watch
At the moment, the index is retreating 0.02% at 1.1897 and faces the next support at 1.1835 (2021 low Mar.9) seconded by 1.1820 (200-day SMA) and finally 1.1762 (78.6% Fibo of the November-January rally). On the flip side, a break above 1.1976 (50% Fibo of the November-January rally) would target 1.2032 (100-say SMA) en route to 1.2113 (monthly high Mar.3).
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