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  • EUR/USD loses the grip and retreats to the 1.0850 area.
  • Speculations of probable German fiscal stimulus lift the pair earlier.
  • ECB’s Lagarde said confidence in EUR is crucial.

After briefing surpassing the 1.0900 level, EUR/USD met some selling pressure and it has now returned to the 1.0870/75 band at the time of writing.

EUR/USD up on German stimulus rumours

EUR/USD managed to extend the recovery to the area above the 1.09 mark earlier in the day, although sellers have quickly stepped in and pushed the spot back to the negative ground.

The European currency saw its upside quickly (and briefly) accelerated after the German Finance Minister said there are plans to suspend, albeit temporarily, the debt break in order to help local governments.

At her visit to Wiesbaden, ECB’s C.Lagarde said the level of confidence in the euro is crucial, while she welcomed fiscal stimulus when comes to support the economy.

Nothing noteworthy in the docket, whereas US New Home Sales for the month of January are coming up next across the pond seconded by the EIA’s report on US crude oil supplies.

What to look for around EUR

EUR/USD keeps the bid bias unchanged so far this week on the back of upbeat data in Germany and fresh selling impetus around the buck. 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 retreating 0.14% at 1.0866 and a break below 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 hurdle aligns at 1.0908 (weekly high Feb.26) seconded by 1.0954 (38.2% Fibo of the 2020 drop) and finally 1.0981 (monthly low Nov.29 2019).