- EUR/USD debilitates further and tests the 1.0850/45 band.
- US Core CPI rose 2.3% YoY in December, bettering estimates.
- Fresh Chinese coronavirus jitters prompt caution among traders.
Another session, another yearly low in EUR/USD, as the single currency has depreciated to the 1.0850/45 band vs. the buck earlier in the session, area last visited in April 2017.
EUR/USD looks to USD, China
The pair has intensified the downside in the second half of the week following renewed concerns around the Chinese COVID-19, which were enough to support the resurgence of the risk-off trade earlier in the session, lending extra oxygen to the dollar (and other safe havens).
Speaking about the greenback, the US Dollar Index (DXY) remains bid in the vicinity of YTD highs in the 99.00 neighbourhood after US inflation figures saw the headline CPI rising at a monthly 0.1% and 2.5% YoY, while the Core CPI advanced 0.2% inter-month and 2.3% YoY.
Additional US data saw Initial Claims rising at a weekly 205K, reflecting once again the healthy conditions of the US labour market.
Data wise in Euroland, German final inflation figures for the month of January met the preliminary readings: consumer prices went up 1.7% YoY and contracted 0.6% MoM.
In the meantime, there appears to be no respite for the decline in the pair, at least in the very near-term, although the current “oversold” levels could trigger some technical corrective upside soon.
What to look for around EUR
The pair is managing to bounce of YTD lows near 1.0860 region (Wednesday) on the back of an apparent correction lower in the greenback. In the meantime, USD-dynamics are expected to dictate the pair’s price action for the time being along with the broad risk trends, where the COVID-19 is still in the centre of the debate. On another front, the ECB is expected to finish its “strategic review” (announced at its January meeting) by year-end, leaving speculations of any change in the monetary policy before that time pretty flat. Further out, latest results from the German and EMU dockets continue to support the view that any attempt of recovery in the region remains elusive for the time being and is expected to keep weighing on the currency.
EUR/USD levels to watch
At the moment, the pair is retreating 0.16% at 1.0856 and a break below 1.0847 (weekly/2020 low Feb.13) would target 1.0814 (78.6% Fibo of the 2017-2018 rally) en route to 1.0569 (monthly low Apr.10 2017). On the flip side, the next resistance is located at 1.0957 (weekly high Feb.10) seconded by 1.1017 (21-day SMA) and finally 1.1076 (55-day SMA).