EUR/USD remains directionless around 1.2150 ahead of Powell

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  • EUR/USD’s gains stay capped by the 1.2180 area.
  • EMU’s final January CPI matched preliminary figures.
  • Fed’s Powell speaks on the state of the monetary policy later.

After climbing to multi-day highs around 1.2180, EUR/USD faced the resumption of the selling pressure and slipped back to the mid-1.2100s.

EUR/USD now looks to Powell

The upper-1.2100s proved to be a tough barrier for EUR-bulls once again after EUR/USD failed to extend the recent recovery further north of the 1.2180 level during early trade.

The earlier positive move was on the back of the persistent leg lower in the greenback, although the buck managed to regain some grip and reclaim the positive territory despite the steady performance of US yields and sustained by some mild risk aversion.

In the euro docket, final January inflation figures in the euro area showed the headline CPI rose 0.9% YoY and 1.4% when stripping food and energy costs.

In the US, the House Price Index tracked by the FHFA rose 1.1% on a year to December, while prices gauged by the S&P/Case-Shiller Index rose 10.1% during the same period.

Later in the session, the Conference Board will publish its Consumer Confidence measure for the current month, while Fed’s J.Powell will deliver the Semiannual Monetary Policy Report against rising speculations regarding the potential tapering of the Fed’s QE programme sooner than expected.

What to look for around EUR

EUR/USD advances further north of the 1.2100 mark and faces the critical hurdle near the 1.2200 mark. The constructive outlook for the pair, however, is expected to remain unchanged in the longer run, always supported by the reflation/vaccine trade and hopes of a strong recovery in the region. 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.

Key events in Euroland this week: January’s final inflation figures (Tuesday). German final Q4 GDP results (Wednesday). European Council meeting (Thursday and Friday). ECB’s Lagarde will participate in the G20 meeting of central bank governors and finance ministers on Friday

Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Huge long positions in the speculative community.

EUR/USD levels to watch

At the moment, the index is losing 0.05% at 1.2147 and faces immediate contention at 1.2023 (weekly low Feb.17) followed by 1.2004 (100-day SMA) and finally 1.1952 (2021 low Feb.5). On the upside, a breakout of 1.2179 (weekly high Feb.23) would target 1.2189 (weekly high Jan.22) en route to 1.2349 (2021 high Jan.6).

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