The EUR/USD pulled-back today, driven by the rising risks in the market and the mixed economic data from Europe. The pair dropped to 1.2080, which is 2.8% below the year-to-date high of 1.2348.
Wall Street Bets risks push the dollar higher
The EUR/USD is falling partly because of the Wall Street Bets (WSB). In the past few days, several assets have been relatively volatile, driven by the activities in social media. Last week, stocks like GameStop, AMC, Blackberry, and Nokia rocketed higher due to this hype. Some stockbroker platforms have suspended some of these meme stocks.
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And today, cryptocurrencies like Ripple and Dogecoin have rallied. Similarly, silver has jumped to an eight-year high as social media users touted their silver buys.
As a result, the EUR/USD is falling because of the overall risk-off sentiment. When it happens, it tends to lead to a higher demand for the greenback. In fact, the dollar index has climbed by more than 0.30%.
The pair is also reacting to the mixed economic data from Europe. In a report earlier today, Markit said that the Eurozone manufacturing PMI data rose from 54.7 in December to 54.8 in January. This figure was better than the median estimate of 54.7 and was primarily due to strong demand. In Germany, the PMI dropped from 58.3 to 57.1.
Further data from Europe showed that the German retail sales dropped by 9.6% in December. That is after rising by 1.1% in November. As a result, the sales growth dropped from 5.0% in the previous month to 1.5%. The median estimate by a poll by Reuters was for the sales to drop by 2.6% on a month-on-month basis and rise by 5.0% on a year-on-year basis.
Meanwhile, in Sweden, the economy rose by 0.5% in the fourth quarter after rising by 4.9% in the third quarter. The economy weakened by 2.6% from the same quarter in 2019.
EUR/USD technical outlook
The EUR/USD price dropped to an intraday low of 1.2077 today. On the daily chart, we see that the pair was previously forming a bearish pennant pattern that’s shown in black. Also, the 15-day and 25-day exponential moving averages have made a bearish crossover. Therefore, the pair will likely break-out lower as traders start targeting the next psychological level of 1.2000.