• EUR/USD clinches fresh tops in the 1.2140 region.
• Flash German, EMU Manufacturing PMI surprised to the upside.
• Flash PMIs, housing data, Fedspeak next on tap in the NA session.

The single currency adds to the recent optimism and encourages EUR/USD to regain the key 1.2100 barrier and above at the end of the week.

EUR/USD UPBEAT ON USD-WEAKNESS, DATA

EUR/USD advances for the second session in a row on Friday on the back of the continuation of the corrective downside in the greenback.

In fact, the risk complex regains some shine as investors re-shift their focus to the reflation trade and palpable expectations of strong economic growth in the region in the second half of the week, all underpinned by the acceleration of the vaccine rollout.

In addition, EUR derives extra legs from the positive preliminary prints from Manufacturing PMIs in the core Euroland for the month of February. On the not-so-bright side, the Services sector remains under pressure and keeps struggling amidst the coronavirus pandemic.

In the NA session, Markit will also publish its preliminary gauges for the Manufacturing/Services PMIs for the month of February followed by Existing Home Sales and speeches by FOMC’s Barkin and Rosengren.

What to look for around EUR

EUR/USD regained the 1.2100 mark and above after meeting decent support in the 1.2020 region earlier in the week. The constructive outlook for the pair, however, is expected to remain unchnaged in the longer run, always supported by the reflation/vaccine trade and hopes of a strong recovery in the region. In addition, real interest rates continue to favour the euro area vs. the US, which is also another factor supporting the EUR along with the huge, long positioning in the speculative community.

Eminent issues on the back boiler: EUR appreciation could trigger ECB verbal intervention, always on inflation issues. EU Recovery Fund. Huge long positions in the speculative community.

EUR/USD levels to watch

At the moment, the index is gaining 0.42% at 1.2139 and a breakout of 1.2169 (weekly high Feb.16) would target 1.2173 (23.6% Fibo of the November-January rally) en route to 1.2189 (weekly high Jan.22). On the downside, the next support is located at 1.2023 (weekly low Feb.17) followed by 1.1996 (100-day SMA) and finally 1.1952 (2021 low Feb.5).