EUR/USD flirts with session tops around 1.2160

  • EUR/USD regains upside traction and approaches 1.2160.
  • The German Economic Sentiment improves to 71.2 in February.
  • US NY Empire State, Fed’s Bowman, TIC Flows next in the US docket.

The single currency pushes higher and encourages EUR/USD to advance to weekly highs in the 1.2155/60 band on Tuesday.

EUR/USD remains bid and targets 1.2190

EUR/USD extends the daily gains to the vicinity of 1.2160 following positive results from the euro docket while further weakness continues to hurt the greenback.

Indeed, the Economic Sentiment in Germany improved further to 71.2 for the current month (from 61.8). Back to Euroland, the Economic Sentiment followed suit and ticked higher to 69.6 (from 58.3).

Additionally, another revision of Q4 GDP figures in the broader euro area now sees the economy contracting 0.6% QoQ, a tad better than the previous 0.7% drop predicted. On an annualized basis, the region is forecast to contract 5.0%.

Looking at the broader picture, the reflation trade continues to dictate the price action in the global assets, helped at the same time by the accelerating vaccine rollout in Asia and Europe. The latter gives extra sustain to the idea of a sharp rebound in the economic activity in the second half of the year.

What to look for around EUR

EUR/USD still faces a tough barrier in the mid-1.2100s. The rebound from 2021 lows near 1.1950 (February 5) follows the constructive outlook for the pair in the longer run and is always supported by prospects of the reflation trade, hopes of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB along with hopes of an acceleration in the vaccine rollout. In addition, real interest rates continue to favour the euro area vs. the US, which is also another factor supporting the EUR along with the huge, long positioning in the speculative community.

Key events in Euroland this week: ECB Accounts (Thursday) and German, EMU flash PMIs on Friday.

Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Huge long positions in the speculative community.

EUR/USD levels to watch

At the moment, the index is gaining 0.24% at 1.2156 and a break above 1.2173 (23.6% Fibo of the November-January rally) would target 1.2189 (weekly high Jan.22) en route to 1.2349 (2021 high Jan.6). On the downside, the next support lines up at 1.1985 (100-day SMA) followed by 1.1952 (2021 low Feb.5) and finally 1.1887 (61.8% Fibo of the November-January rally).


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