- EUR/USD trades flat in the mid-1.2100 on turnaround Tuesday.
- US politics, yields keep dominating the FX universe so far this week.
- Retail Sales in Italy contracted nearly 7% MoM in November.
The downside pressure in the single currency appears mitigated so far on turnaround Tuesday and motivates EUR/USD to hover around themed-1.2100s in the wake of te opening bell in Euroland.
EUR/USD looks to USD, pandemic, risk trends
EUR/USD is attempting to finally reverse three consecutive daily pullbacks and spark a more serious rebound after bottoming out in 3-week lows near 1.2130 at the beginning of the week.
Indeed, the persistent and renewed buying pressure surrounding the greenback forced the pair to recede from yearly tops in the 1.2350 region, shedding at the same time more than 2 cents in just three sessions. In spite of the current bullish attempt of the pair, recent activity in open interest and volume in the EUR futures markets seems to suggest that the correction lower could still has some legs to go, at least in the very near term.
As usual, the upside momentum in US yields – particularly the 10-year benchmark – has been bolstering the recovery in the buck in detriment of the demand for risk-associated assets.
Nothing relevant data wise in the euro area on Tuesday other than the nearly 7% monthly contraction of Italian Retail Sales during November. Across the pond, the NFIB Index is due followed by the IBD/TIPP Index, JOLTs Job Openings and the API’s report on US crude oil supplies.
Additionally, Atlanta Fed R.Bostic (voter, centrist), FOMC’s L.Brainard (permanent voter, dovish), Dallas Fed R.Kaplan (2023 voter, hawkish), Cleveland Fed L.Mester (2022 voter, hawkish) and KC Fed E.George (2022 voter, hawkish) are all scheduled to speak throughout the session.
What to look for around EUR
The upside momentum in EUR/USD run out of steam in the 1.2350 area earlier in the month. In spite of the corrective downside, the outlook for EUR/USD remains constructive and appears supported by prospects of a strong recovery in the region (and abroad), which is in turn underpinned by extra fiscal stimulus by the Fed and the ECB. 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.
EUR/USD levels to watch
At the moment, the pair is gaining 0.14% at 1.2166 and a break above 1.2349 (2021 high Jan.6) would target 1.2413 (monthly high Apr.17 2018) en route to 1.2476 (monthly high Mar.27 2018). On the other hand, immediate contention is seen emerging at 1.2132 (weekly low Jan.11) seconded by 1.2058 (weekly low Dec.9) and finally 1.2032 (23.6% Fibo of the 2017-2018 rally).