Sentiment towards the EUR/USD is bullish after Federal Reserve Chair Jerome Powell pushed aside inflation concerns and committed to maintaining extremely accommodative policy nL1N2KU1XL.
But the pair needs to break above 1.2200 soon to spur fresh buying, or longs would risk a correction back towards 1.2000.
EUR/USD has been consolidating between 1.1950 and 1.2200 since mid-January, as sellers of the dollar have favoured risk/commodity currencies and the resurgent pound over the euro nL1N2KU0X8.
EUR/USD longs are exposed to higher U.S. Treasury yields nL1N2KU1H5 and the prospect of a faster economic recovery in the U.S. than Europe, as the prospect of an accelerated vaccine rollout in the U.S. improves by the day nL4N2KU407.
A EUR/USD break above 1.2200 would encourage bulls and likely lead to fresh buying. A clear break above 1.2197, the 61.8 Fibonacci retracement of this year's 1.2349-1.1952 decline, would open the way for another test above 1.2300.
Conversely, a break and close below the 21-day moving average at 1.2098 would suggest a short-term top is in place, with the risk of a correction back towards 1.2000.
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