- EUR/USD has met contention near 1.20 so far.
- The better tone in the dollar keeps the pair under pressure.
- The US ADP report surprised to the upside at 174K in January.
The single currency remains under pressure and motivates EUR/USD to shed further ground and record new yearly lows just above 1.20 the figure on Wednesday.
EUR/USD looks to USD
EUR/USD drops and navigates in levels last seen in December 2020 around the 1.20 area, always on the back of the moderate recovery in the greenback. The renewed bid bias in the buck comes hand in hand with the improvement in US 10-year yields, bouncing to the 1.21% region after bottoming out around 1.06% at the beginning of the week.
The euro came under extra pressure as of late in response to investors’ perception of a double-dip recession in the euro area. Poor figures from the Services PMIs in the core euro area earlier on Wednesday give extra sustain to this idea.
On the brighter side in the region, advanced inflation figures showed consumer prices are expected to rise more than expected in January, although this uptick in both the CPI and the Core CPI are seen as temporary.
Across the pond, the ADP report noted the US private sector added 174K jobs during last month, more than initially estimated. Later in the NA, the ISM will publish its Non-Manufacturing measure for the month of January.
What to look for around EUR
The decline in EUR/USD is about to challenge the key 1.20 yardstick any time soon. While the outlook for the pair looks 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 pair is down 0.20% at 1.2019 and faces immediate contention at 1.2004 (2021 low Feb.3) seconded by 1.2000 (psychological mark) and finally 1.1976 (50% Fibo of the November-January rally). On the other hand, a breakout of 1.2173 (23.6% Fibo of the November-January rally) would target 1.2189 (weekly high Jan.22) en route to 1.2349 (2021 high Jan.6).