EUR/USD remains on the defensive near 1.0820 post-IFO

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  • EUR/USD trades on the back footing on Monday.
  • German IFO survey came in above estimates in February.
  • Risk-off mood re-emerged on the back of coronavirus fears.

The single currency has started the week on a negative mood and is now taking EUR/USD to the 1.0820 region amidst a renewed buying interest in the greenback.

EUR/USD offered on risk-off sentiment

EUR/USD is fading part of Friday’s strong gains to the mid-1.0800s, where the recovery appears to have lost some vigour.

The resurgence of the risk-aversion in response to heightened concerns around the Chinese COVID-19 have lent extra support to the safe haven universe and the greenback on Monday, which has resumed the upside following the daily pullback at the end of last week.

In the docket, the euro attempted a move to the 1.0840 region – where coincides the 10-day SMA – after the German IFO survey surprised to the upside earlier today. Indeed, the German Business Climate improved a tad to 96.3 (from 96.0) for the month of February, bettering consensus. Further results from the survey saw the Current Assessment component at 98.9 and Business Expectations at 93.4, all surpassing forecasts.

Later in the US calendar, the Chicago Fed Acitvity index is due seconded by the Dallas Fed manufacturing gauge, while Cleveland Fed L.Mester (voter, hawkish) will speak on Economy at the NABE Conference.

What to look for around EUR

EUR/USD is seen some light at the end of the tunnel at the end of last week on the back of upbeat data in the euro docket, managing at the same time to put further distance from recent YTD lows in the 1.0780/75 band. As usual, USD-dynamics are seen dictating the pair’s price action for the time being along with the broader risk appetite trends, where the COVID-19 remains in centre stage. On another front, the ECB is expected to finish its “strategic review” (announced at its January meeting) by year-end, leaving speculations of any change in the monetary policy before that time pretty flat. Further out, latest results from the German and EMU dockets continue to support the view that any attempt of recovery in the region remains elusive for the time being and is expected to keep weighing on the currency.

EUR/USD levels to watch

At the moment, the pair is losing 0.27% at 1.0818 and a breakdown of 1.0777 (weekly/2020 low Feb.20) would target 1.0710 (monthly low Jan.5 2016) en route to 1.0569 (monthly low Apr.10 2017). On the flip side, the next up barrier is located at 1.0863 (high Feb.21) followed by 1.0879 (2019 low Oct.1) and finally 1.0892 (23.6% Fibo of the 2020 drop).

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