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EUR / USD may fall below 1.20

The EUR / USD pair on Tuesday remains under pressure amid the strengthening of the dollar across the entire spectrum of the market. Today the US currency is trading higher against all G7 currencies. The dollar index has strengthened by 0.16% since the beginning of the day.

Additional pressure on the European currency is exerted by the comments of the head of the ECB. On Monday evening, Christine Lagarde expressed concern about the rapid rise in government bond yields. She said the ECB will prevent premature increases in the cost of borrowing for companies and households. She noted that the pandemic continues to have a negative impact on the economy, so the regulator must maintain stimulus measures.

Another ECB spokesman, François Villerois de Galhau, was even more outspoken. He argued that the recent rise in yields on some bonds was unwarranted and that the ECB should counteract this by using the flexibility inherent in its bond buying program.

The statements of the ECB representatives had a positive impact on the American currency, as many investors are convinced that the Fed will react more restrainedly to the growth of government bond yields than other world central banks. In particular, the President of the Federal Reserve Bank of Atlanta Rafael Bostic said that bond yields remain relatively low. Earlier, Fed Chairman Jerome Powell also did not express concern about the growth of US Treasury yields.

In the economic calendar today it is worth paying attention to the publication of data on the labor market in Germany and preliminary data on the consumer price index in the EU.

The bearish signals are still prevailing on the chart locally. This does not exclude the possibility of a rollback movement, but in the medium term, the downward movement remains a priority. The target may be the level 1.1960.

  • Resistance levels: 1.2090, 1.2130, 1.2190.
  • Support levels: 1.2020, 1.1960, 1.1900.

The main scenario is a correction to 1.2090 and a downward reversal.

An alternative scenario is a decline in the direction of 1.1960 from current levels.

The current fundamental background is moderately negative. We consider shorts on a pullback to the level of 1.2090.

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