- EUR/USD remains well on the defensive near 1.1800.
- The pair breaks below the key 200-day SMA (1.1851).
- German, EMU flash manufacturing PMI remain strong in March.
The selling pressure in the shared currency stays anything but abated and drags EUR/USD to fresh YTD lows in the vicinity of the 1.1800 mark.
EUR/USD weaker on USD-buying
EUR/USD loses ground for the second session in a row and extend the leg lower below the critical 200-day SMA. The breakdown of the latter on a convincing fashion opens the door to extra losses, with the initial target at the 1.1800 neighbourhood.
New lockdown measures, tighter COVID-19 restrictions and the surprisingly slow vaccine rollout in the Old Continent sap investors’ optimism of a strong economic rebound in the second half of the week, keeping the downside pressure well and sound around the euro.
In the docket, auspicious flash PMIs in the core Euroland for the current month fail to ignite some buying interest among market participants, leaving the door open for the continuation of the current retracement for the time being.
Data wise in the US docket, Powell will testify before the Senate and the calendar will be dominated by Durable Goods Orders and Markit’s advanced PMIs.
What to look for around EUR
EUR/USD accelerates the downside and finally breaches the key 200-day SMA around 1.1850. The persistent solid performance of the greenback has been undermining the constructive view in the pair in the past weeks, as market participants continue to adjust to higher US yields, the outperformance of the US economy (vs. its G10 peers) and the deterioration of the morale in Euroland. However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair.
Key events in the euro area this week: Advanced PMIs for the month of March, flash Consumer Confidence (Wednesday) – European Council meeting (Thursday and Friday).
Eminent issues on the back boiler: Potential ECB action to curb rising European yields. EUR appreciation could trigger ECB verbal intervention, especially amidst the future context of subdued inflation. Probable political effervescence around the EU Recovery Fund.
EUR/USD levels to watch
At the moment, the index is losing 0.10% at 1.1836 and faces the next support at 1.1812 (2021 low Mar.24) seconded by 1.1762 (78.6% Fibo of the November-January rally) and finally 1.1602 (monthly low Nov.4). On the other hand, a breakout of 1.1989 (weekly high Mar.11) would target 1.2000 (psychological level) en route to 1.2045 (50-say SMA).
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