- EUR/USD drops to session lows and approaches 1.2100.
- The softer note in the risk complex weighs on the pair.
- Spanish final January CPI came in at 0.0% MoM, 0.5% YoY.
The single currency is now trading on the defensive and drags EUR/USD back to the vicinity of the 1.2100 mark at the end of the week.
EUR/USD weaker on USD-rebound
EUR/USD looks offered on Friday following three daily builds in a row. The inability of the pair to advance further north of the 1.2150 region appears to have prompted some profit taking among investors and the return to the sellers to the markets.
On the broader front, strong growth prospects in the region remain underpinned by the expected better performance of the vaccine rollout and the extra help of further fiscal stimulus in the US.
In the domestic docket, the only release showed that the final CPI in Spain came in flat on a monthly basis during the first month of the year and rose 0.5% over the last twelve months.
In the NA session, the flash print of the US Consumer Sentiment tracked by the U-Mich index will take centre stage later on Friday.
What to look for around EUR
EUR/USD faces a tough barrier in the mid-1.2100s so far this week. The rebound from last week’s lows near 1.1950 follows the constructive outlook for the pair in the longer run and is always supported by prospects of the reflation trade, hopes 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.
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 losing 0.12% at 1.2113 and faces immediate contention at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1719 (200-day SMA). On the other hand, a break above 1.2144 (weekly high Feb.10) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22).
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