EUR/USD tests daily highs around 1.0850 post-US data


The shred currency has recovered the smile at the end of the week, with EUR/USD now navigating the upper end of the daily range around 1.0850.

EUR/USD bounces off 2020 lows

The pair seems to have met some decent contention to the massive sell-off in the 1.0830/25 band, levels recorded earlier on Friday and traded before in April 2017.

Renewed fears around the Chinese COVID-19, negative prints from fundamentals in both Germany and the euro area coupled with the solid sentiment surrounding the buck have been all weighing on the pair in the last couple of weeks and forced it to shed around 2.4% since February’s top below 1.1100 the figure (February 3rd). It remains to be seen, however, if the current rebound turns up to be a more serious bullish attempt or just a "technical bounce", particularly considering the extreme oversold levels the spot is navigating.

Earlier on Friday, flash Q4 GDP readings in Germany and the broader Euroland reminded investors that there is still no respite for the slowdown in the region. In the US, advanced headline Retail Sales expanded at a monthly 0.3%, same monthly variation as core sales.

Additional US data saw Export Prices gaining 0.7% MoM in January while Import Prices came in flat during the same period, both prints surpassing initial estimates. Later, the U-Mich will publish its preliminary gauge of the US Consumer Sentiment for the current month.

What to look for around EUR

The pair has so far managed to bounce off YTD lows around 1.0830 at the end of the week, although the bearish mood surrounding the European currency remains far from abated. 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 advancing 0.12% at 1.0851 and faces the initial hurdle at 1.0957 (weekly high Feb.10) seconded by 1.1001 (21-day SMA) and finally 1.1072 (55-day SMA). On the downside, a breach of 1.0827 (weekly/2020 low Feb.14) would target 1.0814 (78.6% Fibo of the 2017-2018 rally) en route to 1.0569 (monthly low Apr.10 2017).