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9 Jan 2020

EUR/USD regains some shine, around 1.1120

  • EUR/USD bounces off recent lows near 1.1100.
  • Easing geopolitical jitters help the risk-on mood.
  • German Industrial Production expanded during November.

The better tone in the risk-associated complex is bolstering the rebound in EUR/USD to the area of daily highs around 1.1120.

EUR/USD stronger on risk appetite

The volatility stemming from the recent developments in the Middle East appears mitigated in the second half of the week, particularly after Wednesday’s speech by President Trump.

The subsequent rally in the riskier assets is motivating spot to rebound from yearly lows in the vicinity of 1.1100 the figure seen on Wednesday, shifting its focus at the same time to the key 200-day SMA in the 1.1140 region.

Data wise in Germany, the poor momentum in the industrial/manufacturing sector saw some respite in November after the Industrial Production expanded 1.1% from a month earlier. Still in Germany, the trade surplus shrunk to €18.3 billion (from €20.4 billion) during the same period. Later in the day the unemployment figures in the broader Euroland are due for release.

Across the pond, Initial Claims are due as usual along with Fedspeak.

What to look for around EUR

The pair seems to have met some decent contention in the 1.1100 neighbourhood so far. The inability of the spot to surpass the area of recent tops beyond the 1.1200 handle – ideally in the short-term horizon - carries the potential to trigger some consolidation and eventually the resumption of the downside. In the meantime, markets’ attention remains on the US-Iran conflict while some cautiousness has recently emerged regarding the imminent sign of the US-China’s ‘Phase One’ deal (on January 13th?). On the more macro view, the slowdown in the region remains far from abated and continues to justify the ‘looser for longer’ monetary stance from the ECB and the cautious/bearish view on the European currency.

EUR/USD levels to watch

At the moment, the pair is gaining 0.09% at 1.1115 and faces the next up barrier at 1.1186 (61.8% of the 2017-2018 rally) seconded by 1.1199 (high Dec. 13 2019) and finally 1.1222 (2020 high Jan.2). On the flip side, a breakdown of 1.1102 (2020 low Jan.8) would target 1.1092 (55-day SMA) en route to 1.1066 (low Dec.20 2019).

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