- EUR/USD recedes from Tuesday’s tops, back near 1.1200.
- US-China trade dispute remains in the limelight.
- German Industrial Production contracted 1.5% MoM in June.
The shared currency has regained its shine on Wednesday, taking EUR/USD to the 1.1200 neighbourhood amidst persistent trade concerns.
EUR/USD upside bolstered by weak USD
The pair keeps the bid tone unchanged so far this week and following yesterday’s doji-like candle after a failed attempt to extend the rebound further north of the 1.1250 region.
Omnipresent trade concerns keep US yields under pressure and favour the demand for safe havens like JPY and CHF. Declining US yields have prompted US-German spread differentials to shrink to the lowest level since March 2018 around 220 pts, collaborating further with the rebound in spot.
In the docket, German Industrial Production sunk 1.5% MoM during June, missing consensus as well. Across the pond, MBA Mortgage Approvals, the DoE report and Credit Consumer figures are also due in an otherwise uneventful session.
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 0.01% at 1.1199 and breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1296 (200-day SMA). On the flip side, the next support emerges at 1.1143 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1).
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