EUR/USD bounces-back towards 1.2400 ahead of EZ GDP

• USD buying stalls as USTs retreat.
• Cross-driven flows dominate.
• Focus shifts to EZ GDP, German CPI.

The EUR/USD pair extended its steady decline into Europe and hit fresh four-day lows of 1.2336, before attempting a solid recovery above the midpoint of the 1.23 handle.

EUR/USD looks to regain 1.2400?

The spot came under pressure this Tuesday, mainly in response to broad-based US dollar rebound while sharp declines seen in the EUR/JPY and EUR/CHF cross also dragged the Euro lower against its American counterpart.

However, over the last hour, the major reversed almost entire losses and now heads back towards the 1.24 handle, as the USD rebound loses steam versus its major rivals amid a retreat in Treasury yields across the curve. The USD index eased to 89.20, having faced rejection near 89.50 while 10-year Treasury yields corrected sharply from 45-month tops of 2.733% to now trade flat near 2.696%.

In the day ahead, the main currency pair awaits the Eurozone prelim flash Q4 GDP report for the next direction ahead of the German CPI and US consumer confidence releases.

EUR/USD Preferred Strategy

Jim Langlands at FX Charts, notes: “With the daily/weekly charts still looking positive though, any weakness may be short-lived and buying dips may still be the medium term trade.  The 100 MMA/200 MMA will provide stiff resistance, but above 1.2500 would then target 1.2538, beyond which would open 1.2650. In the meantime, look for the 100 MMA/200 MMA to cap it and selling into rallies is the near term plan.”

Key Levels