EUR/USD flirts with the 200-day SMA near 1.1100

• The upside momentum in EUR/USD remains intact near 1.1100.
• The dollar loses further ground on speculations of Fed easing.
• German final manufacturing PMI came in at 50.0 in February.

The sharp recovery in EUR/USD remains well and sound for yet another session on Monday and is now testing the key 1.1100 region, home of the critical 200-day SMA.

EUR/USD shift its focus to 1.1100

EUR/USD is extending the recovery at the beginning of the week on the back of the persistent and now accelerated selling bias surrounding the greenback. Indeed, sellers keep dominating the sentiment around the buck, particularly after Fed’s Powell left the door open for an imminent rate cut at the March meeting (or even before, according to some analysts).

In fact, the unremitting concerns around the Chinese coronavirus (COVID-19) and its impact on the global economy appears to have motivated the Fed to start to re-consider another ‘insurance’ cut as soon as this month in order to prevent a larger negative effect on the US economy.

Closer to home, final manufacturing PMIs in Spain, France, Germany and the broader Euroland for the month of February appear to be also supportive of the upside momentum in the shared currency. That said, EUR/USD has practically fully reversed the February sharp sell-off and is flirting with the critical 1.1100 neighbourhood, where emerges the 200-day SMA.

Later in the NA session, the ISM Manufacturing will be in centre stage seconded in relevance by the final manufacturing gauge by Markit and January’s Construction Spending figures.

What to look for around EUR

EUR/USD keeps the bid bias unchanged for yet another week in response to the increasing selling pressure around the buck. As usual, USD-dynamics are seen dictating the pair’s price action for the time being along with the broader risk appetite trends, where the coronavirus fears remain in centre stage. On another front, the ECB is expected to finish its “strategic review” (announced at its January meeting) by year-end, leaving speculations of any change in the monetary policy before that time pretty flat. Further out, recent better-than-expected results in both Germany and the broader Euroland appear to have re-ignited some optimism among investors regarding the possibility of some recovery in the region and the currency. This view is also supported by rumours of fiscal stimulus in Germany.

EUR/USD levels to watch

At the moment, the pair is gaining 0.44% at 1.1074 and faces the next hurdle at 1.1093 (weekly/monthly high Mar.2) seconded by 1.1098 (200-day SMA) and finally 1.1140 (78.6% Fibo of the 2020 drop). On the downside, a breakdown of 1.0992 (monthly low Jan.29) would target 1.0913 (21-day SMA) en route to 1.0879 (monthly low Oct.1 2019).