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EUR/USD spot at publication: 1.2031Bank transfer rates (indicative guide): 1.1610-1.1690FX transfer specialist rates (indicative): 1.1940-1.1960More information on specialist rates, hereThe Euro-to-dollar exchange rate fell below the key 1.20 level last week, before ultimately recapturing the level ahead of the weekend following the release of some less-than-stellar U.S. employment data.

The ability of the exchange rate to retake 1.20 has impressed some market participants who say the robust response by the single currency keeps alive a broader trend of appreciation.

However, for Roberto Mialich, FX Strategist at UniCredit Bank in Milan, greater confidence in the Euro's comeback will be established if a a move above 1.21 occurs near-term:

"In the past, EUR-USD breaking through a key level such as 1.20 would have sparked a heavy sell-off. This time, the pair appeared to find a floor at around 1.1950 and weaker-than-expected labor data in the US were sufficient to lift it back close to 1.2050," says Mialich in a research note out on Monday.

"However, this is not enough to erase downward pressure," he warns.

For the Euro outlook to improve in the near-term Mialich says charts would require EUR-USD to recapture the 1.21 handle and then stabilise again in the 1.21-1.2150 area.

"How much the weak US job report has interrupted the USD recovery is set to be one key theme this week in the FX market, but it is not the only one," says Mialich.

The U.S. Dollar pared its recent gains against the Euro, Pound and other major currencies on Friday following the release of U.S. jobs data that showed the economy added 49K jobs in January.

The result proved to be a vast improvement of the -227K figure that was reported in December, but a big miss on the +105K the consensus was expecting.

The market appears to have also latched onto the notable downgrade to the December data, which was reported at -140K when initially released in January.

"This is a significantly softer report than expected, at least in terms of payrolls," says Ian Shepherdson, Chief Economist at Pantheon Macroeconomics. "The bottom line here is that the labor market was frozen at the start of the year, and is completely dependent on the pace of reopening, which in turn is contingent on the speed and sustainability of the fall in hospitalisations."

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The opposite is therefore also true: when markets are falling, the Dollar rises.

Mialich says the negative correlation between the broader Dollar and stocks has weakened somewhat, as investors are now focused more on a sort of “vaccine spread trade”.

"This means investing in those currencies whose countries are ahead in terms of vaccine availability and distribution and borrowing in currencies whose countries are having more problems with vaccine rollout and are more exposed to new lockdown measures. Hence, this means investing in USD and GBP, while funding in EUR and JPY," he says.

Mialich cautions that the foreign exchange market is however yet to establish clear relationships and trends.

UniCredit currency strategy still looks for global market sentiment is still set to drive currencies in the risk-on scenario we expect this year and thus they remain bearish on the USD.

"We expect to see higher growth in the US than in the eurozone, with the US economy also expected to be back to pre-COVID levels earlier than the eurozone. This picture, and higher US long-term yields, justifies shaving a couple of figures off our EUR-USD targets for 4Q21 and 4Q22, which we now see at 1.26 and 1.30, respectively," says Mialich.