- EUR/USD moves higher and tests the 1.1130 region.
- The greenback remains on the defensive around 98.00.
- Final July’s PMIs next on tap along with the Senitx index.
The shared currency is extending the positive momentum at the beginning of the week and is now lifting EUR/USD to fresh tops in the 1.1130 region.
EUR/USD up on USD-selling, looks to trade
Spot is advancing for the third straight session and at the same time is reversing a 3-week negative streak, all on the back of the continuation of the selling bias around the greenback.
In fact, trade fears have resurfaced after President Trump announced extra tariffs on US imports of Chinese products and China threatened to impose retaliatory measures. The news sparked the prevailing risk-off sentiment, favouring the safe haven currencies, gold and bonds.
In the calendar, the final Services PMIs are due in Euroland along with the Sentix Index for the month of August. Across the pond, all eyes will be upon the publication of the ISM Non-Manufacturing.
What to look for around EUR
The upbeat momentum in the single currency is extending so far this week, always following USD-dynamics and rising concerns on the trade front and its impact on global growth. However, rallies in the pair are expected to remain limited in the near/medium term in tandem with ECB’s preparations for a fresh wave of monetary stimulus (probably in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.
EUR/USD levels to watch
At the moment, the pair is gaining 0.18% at 1.1126 and breakout of 1.1162 (high Jul.31) would target 1.1183 (21-day SMA) en route to 1.1228 (55-day SMA). On the flip side, the next support emerges at 1.1033 (2019 low Aug.1) seconded by 1.1021 (high May 8 2017) and finally 1.0839 (monthly low May 11 2017).
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