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  • EUR/USD faltered near the 1.2180 level earlier on Tuesday.
  • Investors keep looking to yields, US politics, pandemic.
  • Fedspeak, NFIB, IBD/TIPP Index next on tap in the docket.

Following an unsuccessful attempt to advance to the 1.2200 region, EUR/USD returns to the mid-1.2100s, where it is now looking to consolidate.

EUR/USD focused on Fedspeak, data, risk trends

EUR/USD now alternates gains with losses in a broad-based consolidation mood in the global markets, while investors continue to gauge the advance of the coronavirus pandemic vs. the ongoing vaccine rollout, China’s new lockdown measures and a potential extension of the current restrictions in Germany.

In the meantime, the upbeat tone of US yields appears as the main driver of the recent corrective upside in the dollar, while several Fed-speakers recently hinted at the idea that the Federal Reserve could start tapering its bond-buying programme towards year-end. On the latter, market participants are likely to gauge how credible this new tapering version is in the next weeks.

Nothing relevant data wise in the euro area on Tuesday other than the nearly 7% monthly contraction of Italian Retail Sales during November. Across the pond, the NFIB Index is due followed by the IBD/TIPP Index, JOLTs Job Openings and the API’s report on US crude oil supplies.

Additionally, Atlanta Fed R.Bostic (voter, centrist), FOMC’s L.Brainard (permanent voter, dovish), Dallas Fed R.Kaplan (2023 voter, hawkish), Cleveland Fed L.Mester (2022 voter, hawkish) and KC Fed E.George (2022 voter, hawkish) are all scheduled to speak throughout the session.

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 gaining 0.01% at 1.2150 and 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). On the other hand, immediate contention is seen emerging at 1.2132 (weekly low Jan.11) seconded by 1.2058 (weekly low Dec.9) and finally 1.2032 (23.6% Fibo of the 2017-2018 rally).