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  • EUR/USD manages to rebound from the 1.2090 area.
  • US Core CPI rose at an annualized 1.5% in January.
  • The U-Mich index will close the daily docket later.

EUR/USD remains immersed in the negative territory and hovers around the 1.2100 zone at the end of the week.

EUR/USD looks to US data

EUR/USD looks to extend the bounce off daily lows in the 1.2090 zone against the backdrop of a strong buying interest surrounding the greenback.

In fact, the risk-off mood irrupted on Friday in response to the sharp pick up in US yields as market participants see the probability of higher inflation as a result of the planned extra fiscal stimulus under the Biden’s administration.

In the euro docket, France’s flash CPI is expected to contract 0.1% MoM in February, while Spanish consumer prices are seen contracting 0.6% from a month earlier. In addition, ECB’s Schnabel is due to speak, and the European Council will enter its final 2-day meeting.

Data wise in the US, headline PCE and Core PCE rose at a monthly 0.3% in January and 1.5% from a year earlier. Results from the advanced Trade Balance noted the trade deficit is seen at $83.74 billion during last month while Personal Income expanded 10.0% MoM in the first month of the year and Personal Spending expanded 2.4% inter-month.

What to look for around EUR

EUR/USD’s rally finally surpassed the 1.2200 barrier, although the move run out of steam in the 1.2240 region on Thursday. The underlying bullish sentiment in the euro remains under pressure for the time being amidst investors’ adjustment to potential US inflation and the subsequent increase in yields and the demand for the dollar. Looking at the medium/longer-run, the outlook for the pair remains constructive on the back of prospects of extra fiscal stimulus in the US, real interest rates favouring Europe vs. the US and hopes of a solid economic rebound in the next months.

Key events in Euroland this week: European Council meeting (Thursday and Friday). ECB’s Lagarde will participate in the G20 meeting of central bank governors and finance ministers on Friday.

Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Huge long positions in the speculative community.

EUR/USD levels to watch

At the moment, the index is losing 0.35% at 1.2124 and faces immediate contention at 1.2092 (low Feb.26) followed by 1.2023 (weekly low Feb.17) and finally 1.2016 (100-day SMA). On the upside, a breakout of 1.2243 (weekly high Dec.17) would target 1.2349 (2021 high Jan.6) en route to 1.2413 (monthly high Apr.17 2018).

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