EUR/USD sinks to 4-day lows in the sub-1.1900 area

• EUR/USD reverses gains and drops below 1.1900.
• German/EMU Economic Sentiment exceeded expectations in March.
• US advanced Retail Sales contracted 3.0% in February.

EUR/USD quickly fades the initial optimism and tumbles to new multi-day lows in the sub-1.19 region on turnaround Tuesday.

EUR/USD weaker on USD-strength

EUR/USD now trades on the defensive for the third session in a row after briefly testing session tops in the 1.1950 region.

The sudden move lower in the pair comes amidst a bout of strength in the dollar despite US yields remain within a consolidative mood so far on Tuesday.

Auspicious results from the ZEW survey showed the Economic Sentiment in both Germany and the euro area improved further in March, although these results lent an ephemeral support to the single currency.

In the US data sphere, February’s advanced Retail Sales disappointed market participants after contracting at a monthly 3.0%. Core Sales followed suit and also tumbled 2.7% from a month earlier.

What to look for around EUR

EUR/USD met a tough resistance in the proximity of the psychological 1.20 hurdle in past sessions. The persistent solid stance in the greenback in recent weeks has put the previous constructive view in the euro under scrutiny, as market participants continue to adjust to higher US yields and the outperformance of the US economy narrative. However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair.

Key events in Euroland this week: Final February EMU CPI (Wednesday) – ECB’s Lagarde speech (Thursday).

Eminent issues on the back boiler: ECB action to curb rising European yields. EUR appreciation could trigger ECB verbal intervention, especially amidst the future context of subdued inflation. Potential political effervescence around the EU Recovery Fund. Still huge long positioning in the speculative community.

EUR/USD levels to watch

At the moment, the index is losing 0.14% at 1.1908 and faces the next support at 1.1897 (weekly low Mar.16) seconded by 1.1835 (2021 low Mar.9) and finally 1.1762 (78.6% Fibo of the November-January rally). On the upside, a break above 1.1989 (weekly high Mar.11) would target 1.2084 (50-say SMA) en route to 1.2113 (monthly high Mar.3).