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EUR/USD stays offered, puts the 1.2000 level to the test

  • EUR/USD trades on a soft note near the 1.20 yardstick.
  • The recovery in the dollar puts the pair under extra pressure.
  • The ECB meeting will be the salient event later in the week.

Sellers remain in control of the single currency and now force EUR/USD to keep business close to the psychological support at 1.20 the figure.

EUR/USD now looks to the ECB

EUR/USD accelerates the rejection from Tuesday’s peaks in the 1.2080 region and approaches the key support at the 1.2000 mark, always tracking the rebound in the demand for the greenback and lower yields in the German Bunds.

In fact, the dollar picks up extra steam on the back of the persistent risk-off tone, all in response to higher volatility and fresh concerns following rising coronavirus cases mainly in India and Japan.

In addition, yields of the German Bunds navigate the lower end of the range around -0.270% following the earlier auction at -0.250%. The move in the German reference is in stark contrast with the steady/bullish performance of the US 10-year note.

Moving forward, price action around the European currency is expected to lean towards the side-lined trading ahead of the ECB event on Thursday. While any modification of the mega-accommodative stance from the central bank is ruled out, the Council is seen delivering an upbeat message regarding growth prospects in Euroland for the next months.

What to look for around EUR

EUR/USD moved to fresh peaks around 1.2080 before losing some traction amidst the resurgence of dollar demand and volatility on fresh coronavirus woes. The continuation of the rally has been so far supported by the renewed offered bias in the dollar along with the investors’ shift to the growth prospect in Europe now that the vaccine campaign appears to have gained some serious pace. In addition, solid results from key fundamentals and the improvement in the sentiment in the euro area as of late also appear to bolster the momentum surrounding the single currency.

Key events in the euro area this week: ECB interest rate decision, President Lagarde’s press conference, European Commission advanced Consumer Confidence (Wednesday) – Flash April PMIs (Friday), ECB Lagarde speech.

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund.

EUR/USD levels to watch

At the moment, the index is losing 0.23% at 1.2006 and a breach of 1.1913 (200-day SMA) would target 1.1762 (78.6% Fibo of the November-January rally) en route to 1.1704 (2021 low Mar.31). On the other hand, the next hurdle is located at 1.2079 (monthly high Apr.20) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6).

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