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  • EUR/USD’s recovery lost momentum near 1.1930.
  • The dollar reverses initial gains and recedes below 92.00.
  • US 10-year yields appear capped by the 1.70% mark.

The European currency now manages to post some decent gains and lifts EUR/USD to daily highs in the 1.1930 region, area coincident with the 10-day SMA.

EUR/USD looks to USD dynamics

EUR/USD so far manages well to reverse twoc consecutive daily pullbacks and comes back from earlier lows in the 1.1870 region.

Steady yields in the US bond markets fail to lend extra support to the greenback, with the 10-year reference struggling to surpass the 1.70% mark so far at the beginning of the week.

Earlier in the session, ECB’s Board member Knot said better fundamentals support the recent rise in yields, although some of that increase looks unwarranted. In the same direction, Fed’s Barkin noted that the improvement in the outlook is behind rising bond yields.

In the euro docket, the EMU’s Current Account surplus came in at €5.8 billion in January (from €51.9 billion).

What to look for around EUR

EUR/USD keeps the consolidative/bearish theme unchanged and still supported by the critical 200-day SMA near 1.1850. The persistent solid stance in the greenback has been undermining the previous constructive view in the pair in the past weeks, as market participants continue to adjust to higher US yields and the outperformance of the US economy (vs. its G10 peers). However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair.

Key events in the euro area this week: Advanced PMIs for the month of March, flash Consumer Confidence (Wednesday) – European Council meeting (Thursday and Friday).

Eminent issues on the back boiler: Potential ECB action to curb rising European yields. EUR appreciation could trigger ECB verbal intervention, especially amidst the future context of subdued inflation. Probable political effervescence around the EU Recovery Fund.

EUR/USD levels to watch

At the moment, the index is gaining 0.17% at 1.1921 and a breakout of 1.1989 (weekly high Mar.11) would target 1.2058 (50-say SMA) en route to 1.2113 (monthly high Mar.3). On the flip side, the next support is located at 1.1870 (weekly low Mar.22) seconded by 1.1846 (200-day SMA) and finally 1.1835 (2021 low Mar.9).