Search ForexCrunch
  • EUR/USD struggles for direction in the 1.10 area.
  • ECB’s Lagarde noted the resilience in the region’s economy.
  • US Initial Claims only of note across the pond.

EUR/USD is alternating gains with losses in the second half of the week around the psychological 1.10 mark.

EUR/USD looks to risk trends, China

The weekly downside in the pair appears to have met some decent contention at shouting distance from YTD lows around 1.0990 on Wednesday, always against the backdrop of improving sentiment in the risk universe.

Indeed, coronavirus fears look somewhat alleviated following Wednesday’s news that scientists could be developing a treatment to tackle the virus, while extra efforts to contain the fast-spreading virus from the Chinese government are also seen as supportive of the riskier assets in detriment of safe havens (bonds, yen, franc) and funding currencies (euro).

In the docket, German Construction PMI improved to 54.9 during January, while Factory Orders contracted at a monthly 2.1% during the same period, well below forecasts.

Also earlier in the session, ECB’s C.Lagarde said that the current environment of low interest rates and inflation is playing against the probability of the central bank to loosen the monetary conditions in the region.

Later in the NA session, Challenger Job Cuts are due seconded by the usual weekly report on the labour market.

What to look for around EUR

The pair remains on the defensive so far this week after faltering just ahead of the 1.1100 mark in past days. As usual, dynamics around the buck are expected to remain the exclusive driver of the pair’s price action for the time being along with alternating risk appetite trends in response to developments from the Wuhan coronavirus. On another scenario, the ECB is expected to finish its strategic review (announced last Thursday) by year-end, leaving speculations of any change of the monetary policy before that time pretty flat. Further out, some better-than-expected results in the euro region as of late seem to have lent support to the idea that the bloc could have left the worst behind, although that view looks premature, to say the least.

EUR/USD levels to watch

At the moment, the pair is losing 0.01% at 1.0997 and a breakdown of 1.0992 (weekly/2020 low Jan.29) would target 1.0981 (monthly low Nov.29 2019) en route to 1.0879 (2019 low Oct.1). On the flip side, the initial hurdle emerges at 1.1067 (100-day SMA) seconded by 1.1094 (weekly high Jan.31) and finally 1.1118 (weekly high Jan.21).