• EUR/USD keeps moving within the prevailing rangebound trade.
  • The German, EMU ZEW survey comes up next in the calendar.
  • US NY Empire State, Fed’s Bowman, TIC Flows next in the US docket.

The shared currency sticks to the positive territory and motivates EUR/USD to trade with marginal gains around 1.2130 on turnaround Tuesday.

EUR/USD: Gains limited in the mid-1.2100s

EUR/USD looks to extend the (little) optimism observed at the beginning of the week, always supported by the improved sentiment in the risk-associated universe despite showing some signs of exhaustion in past hours.

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.

In the euro docket, all the attention will be on the Economic Sentiment gauge measured by the ZEW survey in both Germany and the broader Euroland along with another estimate of the Q4 GDP figures in the euro bloc. Across the pond, minor data releases include the NY Empire State Index and TIC Flows while FOMC’s M.Bowman is also due to speak.

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: EMU’s Advanced Q4 GDP and German ZEW survey (Tuesday). 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 0.05% at 1.2134 and a break above 1.2144 (weekly high Feb.10) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22). 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).