EUR/USD holds steady above 1.2100, awaits fresh cues
EUR/USD trades above 1.2100, trapped in a narrow range, as the US dollar holds onto the recovery gains. While the upside has been capped around 1.2150, the bears have failed to push the pair below 1.2110, as markets await fresh catalysts.
Technical Overview
From a technical perspective, this week’s sustained move beyond a one-month-old descending trend-line favours bullish traders. However, the lack of any strong follow-through buying warrants some caution before positioning for any further appreciating move. The overnight positive move stalled near the 50% Fibonacci level of the 1.2350-1.1952 recent leg down, which should now act as a key pivotal point for short-term traders.
A sustained move beyond has the potential to lift the pair back towards the 1.2190 supply zone. This coincides with the 61.8% Fibo. level, which if cleared decisively will be seen as a fresh trigger for bullish traders. The pair might then aim to test an intermediate resistance near the 1.2270-75 region before eventually aiming back to reclaim the 1.2300 round-figure mark.
On the flip side, weakness below the 1.2100 mark might now find some support near the mentioned trend-line resistance breakpoint, currently around the 1.2070 region. Failure to defend the resistance-turned-support will negate any near-term bullish bias and turn the pair vulnerable to slide to challenge the key 1.2000 psychological mark. The downfall could further get extended back towards monthly swing lows, around mid-1.1900s.
Fundamental Overview
Time for a new driver? EUR/USD bulls have been at the mercy of falls in the dollar – but that may finally begin to change. Several positive developments in the old continent may tilt the currency pair higher, regardless of the ebb and flow in US yields.
EU vaccinations: After nearly stalling for several weeks, fresh deliveries of covid vaccine doses have revived the old continent’s efforts. Moreover, AstraZeneca – a pharmaceutical that had been on a collision course with the EU over supplies – plans to double its output.
Germany has announced a further improvement in its coronavirus statistics. Europe’s locomotive has seen a drop of active COVID-19 cases to around 155,000, the lower since late October. Other countries are also seeing tentative declines from the peak.
Another positive development comes from Italy. Most political parties in the eurozone’s third-largest economy have agreed to back former European Central Bank President Mario Draghi to lead the country. The incoming Italian Prime Minister enjoys unmatched clout in financial markets and helps boost confidence in the economy.
On the other side of the Atlantic, President Joe Biden continues pushing his proposed $1.9 relief package, yet details remain scarce as the political energy is focused on former President Donald Trump’s trial for inciting insurrection. It seems that markets are already pricing a generous bill, with US bond yields mostly reflecting that. A potential decrease in returns on US debt – a “buy the rumor, sell the fact” response to better growth prospects, may weigh on the greenback.
The economic calendar could also push the greenback back down. US jobless claims disappointed with 793,000 in the week ending on February 5, worse than expected. The focus on Friday is the University of Michigan’s preliminary Consumer Sentiment gauge for February.
source:fxstreet.com