Daily U.S. Session Watchlist: EUR/USD

We’re checking out EUR/USD today as we may get one more potential shot of volatility for the euro ahead of the weekend.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/CHF ahead of the ECB monetary policy statement, so be sure to check that out to see if there is still a potential play!

Fresh Market Headlines & Economic Data:

Bitcoin slumps 10% as pullback from record high gathers pace

Stocks rise to records again as investors buy Apple, tech shares into earnings

ECB leaves policy unchanged, but makes a ‘slight hawkish’ tweak to statement

U.S. jobless claims fall slightly, though remain near 1 million

U.S. homebuilding and permits surged in December

Mid-Atlantic factory activity surges in January: Philly Fed survey

ADP Canada National Employment Report: Employment in Canada Decreased by 28,800 Jobs in December 2020

The flash estimate of the consumer confidence indicator in January decreased in both the euro area (1.7 points down) and the EU (1.6 points down) m/m

Upcoming Potential Catalysts on the Economic Calendar

Australia Flash Manufacturing & Services PMI at 10:00 pm GMT
Japan Inflation Rate at 11:30 pm GMT
U.K. Gfk Consumer confidence at 12:01 am GMT (Jan. 22)
Australia Retail sales at 12:30 am GMT (Jan. 22)
Japan Flash Manufacturing & Services PMI at 12:30 am GMT (Jan. 22)

What to Watch: EUR/USD

On the one-hour chart above of EUR/USD, we can see the market retesting a strong area of interest around the 1.2150 minor psychological level. It was previously an area of support last week, but since breaking lower, has twice refused passage to the bulls.

Right now, traders are trying to figure out which direction to take the pair next, and today’s ECB monetary policy statement wasn’t much help as it kept policy simulative while sounding slightly optimistic at the same time.

But what might help is tomorrow’s round of Eurozone PMI’s, which do tend to be a market mover if we see a broad consensus on the business sentiment outlook.

With the broader trend lower since the beginning of the year and the market holding at the 1.2150 minor psychological level, we’re watching EUR/USD for a potential move lower if the PMI’s disappoint (a highly likely scenario given the recent lockdown extensions). If that scenario plays out, 1.2050 could be the next stop before the end of the week.

If we get a bullish surprise from the  data and the broad markets are leaning risk-on (i.e., bearish USD conditions), then a break above 1.2150 could draw in short-term bulls, or even longer-term bulls who are watching the rally on the Daily charts and above, which has been going on since the Dollar topped out back in March 2020.