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EUR/USD looks for direction around 1.1070, looks to data

  • EUR/USD alternates gains with losses in the 1.1070 region.
  • DXY has regained the 98.00 handle following recent drop.
  • Italian final August CPI next on tap, ahead of US Empire State index.

The single currency has started the week on a neutral stance, with EUR/USD hovering around Friday’s close in the 1.070 area.

EUR/USD focused on data, risk trends

The pair is navigating the 1.1070/60 band so far on Monday, coming under some renewed selling pressure after hitting fresh tops beyond 1.1100 the figure in the wake of the ECB event in the second half of last week. This important area of resistance coincides with the short-term resistance line off June’s peak (at 1.1412).

In the meantime, and while market participants continue to adjust to the recently announced package of monetary stimulus by the ECB, the attention should shift to the FOMC gathering (Wednesday), where another 25 bps ‘insurance rate cut’ is almost fully priced in.

Furthermore, yields of the key German 10-year Bund are expected to face some downside pressure today in light of the pick up in the risk-off sentiment following the drone attacks to Saudi oil facilities last Saturday.

What to look for around EUR

The buying interest around the single currency has picked up extra pace as of late, pushing EUR/USD to levels beyond the 1.11 barrier, where it lost some impetus. In fact, EUR managed to regain poise after the announced €20 billion/month in bond purchases under the re-launched QE programme came in somewhat short of expectations. The ongoing recovery in spot, however, is seen as corrective only always against the backdrop of unremitting slowdown in the region, looser for longer monetary conditions by the ECB and the likelihood that the German economy could slip into technical recession in Q3. Adding to this gloomy scenario, potential US tariffs on imports of EU cars remain well on the table, while persistent uncertainty around Brexit adds to the downbeat outlook.

EUR/USD levels to watch

At the moment, the pair is retreating 0.02% at 1.1069 and a breach of 1.1053 (21-day SMA) would target 1.0925 (2019 low Sep.3) en route to 1.0839 (monthly low May 11 2017). On the upside, the next hurdle aligns at 1.1109 (monthly high Sep.13) seconded by 1.1163 (high Aug.26) and finally 1.1182 (100-day SMA).

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