Search ForexCrunch
  • EUR/USD recedes from tops near 1.2120 on Tuesday.
  • Improved mood in the risk complex weighs on the dollar.
  • ECB’s P.Lane is due to speak later in the session.

The buying bias stays unchanged around the shared currency and prompts EUR/USD to gyrate around the 1.2100 neighbourhood for the time being.

EUR/USD propped up by risk appetite

EUR/USD navigates the area of multi-day highs around 1.2100 against the backdrop of the improved sentiment in the broad risk appetite trends.

Indeed, the reflation trade meets extra support from President Biden’s plan to pump extra stimulus into the economy, while the expected strong recovery in the global economy also collaborates with the pair’s momentum.

The daily downtrend in yields of the US 10-year benchmark also puts the buck under extra pressure and also adds to the bounce in EUR/USD.

Earlier in the euro docket, the German trade surplus improved to €16.1 billion during December. On Monday, Chief Lagarde reiterated the ultra-accommodative stance from the ECB amidst the persistent lack of upside traction of the inflation in the region. Later on Tuesday, ECB’s P.Lane will participate in a virtual panel discussion at the Irish Fiscal Advisory Council conference.

Across the pond, the NFIB Index eased a tad to 95.0 in January (from 95.9), while the JOLTs Job Openings, the weekly API report and the speech by FOMC’s J.Bullard are all expected later in the NA session.

What to look for around EUR

EUR/USD seems to have met decent contention in the YTD lows around 1.1950 (February 5). The ongoing bounce off that area follows the constructive outlook for the pair in 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 along with hopes of an acceleration in the vaccine rollout. 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 this week in Euroland: Lagarde speaks on Wednesday. German final January CPI (Wednesday).

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

EUR/USD levels to watch

At the moment, the index is gaining 0.47% at 1.2101 and a break above 1.2124 (55-day SMA) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22). On the other and, immediate support emerges at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1699 (200-day SMA).