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  • EUR/USD loses further momentum and drops to 1.2060.
  • The better tone in the dollar keeps weighing on the pair.
  • ECB’s Lagarde participates in the EuroGroup meeting.

The selling pressure keeps hurting the single currency and drags EUR/USD further south of the 1.2100 mark at the beginning of the week.

EUR/USD looks to USD, ECB

The continuation of the bid bias around the greenback puts EUR/USD under extra downside pressure and forces it to print new 2020 lows in the 1.2060 region on Monday. This area is also coincident with a Fibo retracement of the November-January rally.

As usual in past sessions, the improvement in the sentiment surrounding the buck has not only tempered the rally in the pair but is has also casted doubts over the resumption of the uptrend at some point in the short-term.

On another front, further effervescence in the Italian political scenario is expected to slowly return to the markets after PM Conte’s Administration will face a confidence vote on Tuesday.

In the broader picture, the risk-associated space failed to pick up upside traction so far in spite of the better-than-forecast results from the Chinese docket earlier in the Asian trading hours.

In the euro docket, ECB’s Lagarde and Panetta will participate in the EuroGroup meeting later on Monday. Earlier, final Italian CPI for the month of December showed consumer prices rose 0.2% MoM and contracted 0.2% YoY.

Nothing scheduled data wise across the pond as US markets will remain closed due to the Martin Luther King Day holiday.

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. The subsequent corrective downside breached already the 1.2100 mark and appears to still have further legs to go. Despite 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 losing 0.08% at 1.2064 and faces the next support at 1.2059 (2021 low Jan.18) seconded by 1.2058 (weekly low Dec.9) and finally 1.1976 (50% Fibo of the November-January rally). On the flip side, 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).