EUR / USD testing last week’s highs at 1.2170 amid a decline in the USD

• EUR / USD has bounced from its DMA of 21 below 1.2100 to test last week’s highs around 1.2170.
• The restrained comments on the yields on EU government debt by the ECB’s Lagarde did not provoke any negative reaction in the euro.
• But if Fed Chairman Powell or Vice President Clarida says the same thing later in the week, this could hurt the USD.

The EUR/USD, having bounced firmly from its 21-day moving average at 1.2090 at the start of European business hours, it has continued to push higher and is currently testing last week’s high at the 1.2170 mark. Therefore, the EUR / USD has managed to confidently cross north of its 50-day moving average, which is currently at 1.21535 and the EUR / USD bulls will be looking to see if the pair can approach north of this level by first time this month.

A close above last week’s high of 1.2170 and the DMa of 50 could be a bullish sign that further pullback could occur towards the 2021 highs set in early January. Other major G10 pairs such as AUD / USD, NZD / USD, GBP / USD, and USD / CAD are all close to or hitting post-Covid-19 highs, so it looks like the US dollar side of the EUR / Eq. USD is not the one stopping the pair from a more aggressive rally.

But with the delay in launching the vaccine in the euro zone, which means its post-Covid-19 economic rebound is likely to be postponed (say compared to the US or UK), and the Prospects for a significant rebound in long-term inflation are much softer than in the US, the poor performance of the euro in recent weeks is perhaps not surprising and looks likely to continue. That does not mean that the carpet cannot be pulled below the US dollar and its long-term downtrend that had been in play for much of 2020 will resume. If that were the case, even though the euro would not. Being the main G10 candidate to benefit from this, the EUR / USD is likely to return to the cycle highs.

Technical levels