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  • EUR/USD comes under extra selling pressure near 1.2100.
  • ECB’s Minutes showed concerns over exchange rate and inflation.
  • US Initial Claims rose to multi-month highs near 1M.

The selling pressure around the single currency stays well and sound and now forces EUR/USD to recede to the proximity of the key support at 1.21 the figure.

EUR/USD offered on risk-off mood

EUR/USD accelerates losses and drops for the second session in a row on Thursday amidst the increasing risk-off context and despite the imminent announcement of further US fiscal stimulus.

However, the release of the ECB’s Accounts showed the Governing Council remains worried over the performance of the exchange rate as well as the lack of traction in inflation and poor growth prospects. The view on the exchange rate has been also highlighted in recent speeches by ECB officials.

In the docket, earlier figures showed the German economy is expected to have contracted 5% during 2020. In the US calendar, Initial Claims rose 965K WoW during last week, levels last seen in August.

What to look for around EUR

The upside momentum in EUR/USD run out of steam in the 1.2350 area earlier in the month. In spite of the corrective downside, the outlook for EUR/USD remains constructive and appears 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 pair is losing 0.25% at 1.2126 and faces the next support at 1.2111 (weekly low Jan.14) seconded by 1.2058 (weekly low Dec.9) and finally 1.2032 (23.6% Fibo of the 2017-2018 rally). On the flip side, a break above 1.2349 (2021 high Jan.6) would target 1.2413 (monthly high Apr.17 2018) en route to 1.2476 (monthly high Mar.27 2018).