EUR/USD struggles to gather upside traction despite upbeat China data

• EUR/USD sidelined near 1.2150 as upbeat China data fails to inspire dollar selling.
• Coronavirus concerns overshadow vaccine optimism and China data and keep risk under pressure.
• The options market sees low odds of a continued rally while heading into the year-end.

China data released early Tuesday showed the economic recovery broadened in November. So far, however, that has failed to invite stronger selling pressure for the safe-haven US dollar, leaving EUR/USD marginally higher on the day near 1.2150. The bulls have failed to keep gains above that level in seven out of the last eight trading days. 

China’s Retail Sales grew by 5.0% year-on-year in November, marking the fourth successive month of expansion. Industrial Production, a gauge of manufacturing, mining, and utility output, increased 7% year-on-year following October’s 5.9% growth. 

An upbeat economic data out of China and other major global economies typically boosts risk appetite and weakens the US dollar. However, the futures tied to the S&P 500 are trading flat at press time, and the dollar is holding ground against major currencies. 

Concerns about increasing COVID-19 deaths and prospects of the economically-painful hard lockdowns could be overshadowing the upbeat China data and optimism about the rollout of coronavirus vaccinations. 

The Eurozone data calendar is light on Tuesday. As such, the pair will be at the mercy of the broader market sentiment during the European hours. Later, the focus would be on the US Export and Import Price Indexes and the US Industrial Production figure. 

EUR/USD’s options market shows put options or bearish bets are now drawing higher prices than calls. That’s a sign of investors positioning for a potential correction in EUR/USD. Further, technical charts are showing signs of uptrend fatigue. However, the immediate bias would turn bearish only below support at 1.2059. 

• ECB’s QE programs are too small – IIF

Technical levels