EUR at risk to drop to 1.230
EUR/USD pair is pointing higher after breaking its intra-yearly downtrend. It is trading at 1.2080, below its year-to-date high of 1.2345.
February has been a relatively volatile month for the Euro. Traders started to worry about low inflation, and the price dropped for the second consecutive month.
During the day, analysts believe that there is room for the Euro to drop below 1.2060, within a 1.2050/1.2130 range.
Lately, the currency has ceded the role of lead player to other major currencies.
For EUR/USD, all focus has been on the Fed’s balance sheet and the Biden fiscal stimulus package.
The ‘rising yields’ narrative is non-existent when it comes to supporting the Euro. Rising inflation data from the US has been one of the top concerns for the pair in the previous month.
In January 2021, the headline consumer price index (CPI) increased by 1.4%. Analysts believe that the CPI will increase by 2% this year if the Senate manages to pass the next stimulus package.
As a result, the Treasury yields soared in February. In March, the focus will be on whether the Senate will pass the stimulus package. This week’s nonfarm payroll numbers and the Fed and ECB interest rate decisions will be other important events deciding how the pair move.
EUR/USD Monthly Forecast for March 2021
Bond yields in the United States are skyrocketing, and they are wreaking havoc not only in the stock markets but also in the currency markets. The 1.20 level below will offer support that will extend to the 1.19 level. Analysts think March will be very volatile. However, it also looks like it will continue to favor the rallies in general. The Euro also can break out to the upside.
If EUR did break down to the downside and below the 1.19 level, that could be very bearish for the Euro.
Looking at the European economy, one of the most worrying things is the lack of vaccines. Analysts are expecting better news this month. So far, the European Union has lagged behind the whole world, so sooner or later, that could cause a problem. However, in the short term, this will be a market that will continue to see a lot of noise, which is typical for the EUR/USD pair. Still, as time goes on, people will continue to focus on the stimulus idea and the easy monetary policy coming out of the United States. That should continue to work against the dollar value, but economic concerns could wreck the situation in the future.
