EUR/USD pushes higher and visits 1.1270 as risk-on persists

  • EUR/USD remains bid and targets the 1.1300 mark.
  • Germany Unemployment Rate ticked lower to 5.1% in January.
  • US ISM Manufacturing PMI next of relevance in the NA session.

The optimism around the European currency remains well and sound and EUR/USD clinches new peaks near 1.1270 on turnaround Tuesday.

EUR/USD remains bid on risk appetite, focuses on data

EUR/USD advances for the third session in a row and gradually approaches the key 1.1300 neighbourhood bolstered by the re-emergence of quite firm appetite for riskier assets and the continuation of the downside in the greenback.

Collaborating with the offered stance in the dollar, US yields remain on the defensive, while yields of the German 10y Bund now recede some ground after Monday’s tops past 0.03%.

Further weakness in the buck came after FOMC’s R.Bostic suggested on Monday that a Fed’s 50 bps interest rate hike should be out of the table in March.

In the domestic docket, the German and EMU final Manufacturing PMIs came in a tad softer than the preliminary readings at 59.8 and 58.7, respectively, for the month of January. Still in Germany, encouraging figures from the labour market saw the jobless rate retreating to 5.1% in January, with 2.345M persons unemployed, and the Unemployment Change shrinking by 48K people. Earlier in the session, Retail Sales contracted 5.5% MoM in December and came in flat vs. December 2020.

Later in the US data sphere, the ISM Manufacturing PMI will grab all the attention followed by the final January Manufacturing PMI tracked by Markit.

What to look for around EUR

EUR/USD extended the bounce off 1.1120 (January 28) and now re-targets the 1.1300 barrier amidst improved risk appetite trends and the renewed selling mood in the dollar. Moving forward, the outlook for the pair remains far from rosy despite the rebound, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.

Key events in the euro area this week: Germany Retail Sales/Unemployment Rate/Unemployment Change/Final January Manufacturing PMI, EMU Unemployment Rate/Final January Manufacturing PMI (Tuesday) – EMU Flash January CPI (Wednesday) – EMU, Germany Final January Services PMI, ECB Meeting (Thursday) – EMU Retail Sales (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.22% at 1.1257 and faces the next up barrier at 1.1269 (weekly high Feb.1) seconded by 1.1304 (55-day SMA) and finally 1.1369 (high Jan.20). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).