- EUR/USD’s downside looks contained in the mid-1.1900s.
- The correction lower in the dollar gives fresh oxygen to the pair.
- US NFP for the month of January will be in the centre of the debate.
The downtrend in EUR/USD appears to have met some decent contention in the 1.1950 region so far this week.
EUR/USD now looks to data
EUR/USD regains the smile so far on Friday after four consecutive daily pullbacks, including a breakdown of the psychological support at 1.20 the figure on Thursday and fresh YTD lows near 1.1950.
The current selling mood around the greenback allows some respite in the pair amidst the recent sharp correction lower, although further retracements remain on the cards in the very near-term.
Solid results from US fundamentals plus the successful vaccine rollout in the US (when compared with Europe) and higher US yields have been sustaining the moderate upside bias in the dollar, lifting DXY to new yearly highs well above 91.00 the figure.
Nothing scheduled data wise in Euroland other than speeches by ECB’s members A.Enria and L. De Guindos. Across the pond, the usual US labour market report is due, with Payrolls expected at +50K and the Unemployment Rate at 6.7% in January.
What to look for around EUR
EUR/USD seems to have met decent contention in the 1.1950 region so far this week, or new 2021 lows. 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 gaining 0.15% at 1.1979 and a break above 1.2064 (38.2% Fibo of the November-January rally) would target 1.2115 (55-day SMA) en route to 1.2189 (weekly high Jan.22). On the downside, initial support is located at 1.1952 (2021 low Feb.4) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1688 (200-day SMA).
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