- EUR/USD keeps the buying interest well and sound near 1.2130.
- US inflation figures came in on the soft side in January.
- Fed’s Powell will speak on the US labour market later in the session.
EUR/USD navigates the 1.2130 region amidst the continuation of the weekly upside on Wednesday.
EUR/USD focused on Powell
EUR/USD adds to Tuesday’s advance beyond 1.21 the figure and puts the 55-day SMA around 1.2130 to the test on Wednesday. The recovery, however, appears to have faltered near 1.2150 ahead of the minor resistance at the Fibo level near 1.2170.
The generalized improvement in the risk universe continues to exert strong pressure on the buck, favouring the continuation of the downtrend in the US Dollar Index. In addition, the leg lower in US yields has accelerated after US inflation figures surprised to the downside in January.
In fact, US headline CPI gained 0.3% inter-month and the Core CPI posted no variation from a month earlier.
Late in the session, all the attention is expected to shift to the speech by Fed’s Powell.
What to look for around EUR
EUR/USD seems to have met decent contention in the YTD lows around 1.1950 (February 5). The ongoing bounce off that area 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 gaining 0.11% at 1.2130 and 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). On the other and, immediate support emerges at 1.1952 (2021 low Feb.5) seconded by 1.1887 (61.8% Fibo of the November-January rally) and finally 1.1706 (200-day SMA).
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