- EUR/USD remains cautious in sub-1.10 levels.
- German IFO next of relevance in the docket.
- US Consumer Confidence will be the salient event later.
The sentiment around the shared currency remains depressed on Tuesday, with EUR/USD navigating the 1.0990 region ahead of key releases in Euroland.
EUR/USD weaker post-PMIs, looks to data
The pair has accelerated the leg lower on Monday in response to awful preliminary prints from PMIs in core Euroland for the current month, showing that the economic outlook in the region keeps deteriorating.
Adding to the pair’s decline, advanced manufacturing data in the US economy surprised to the upside, lending extra oxygen to the buck.
European yields have also lost ground in response to the poor results from the euro docket, widening the spread differential vs. their US peers and thus adding to the correction lower. Later on Monday, President Draghi kept the dovish tone at his testimony before the European Parliament, reiterating that the economic growth momentum in the region has slowed markedly, surpassing the bank’s projections.
Later in the docket, the German IFO will shed more light on how the morale fared during this month among businessmen in the first economy of the euro area. In addition, ECB’s VP L.De Guindos will also speak in Frankfurt. Across the pond, the Conference Board’s gauge of the US Consumer Confidence will be in centre stage seconded by the S&P/Case-Shiller Index.
What to look for around EUR
EUR is facing extra downside pressure at the beginning of the week and threatens to extend the move to 2019 lows in the 1.0920 region, as any recovery in the German economy appears to take longer than expected in light of the recent flash PMIs. The unremitting slowdown in the region justifies the looser for longer monetary conditions by the ECB and adds to the probability 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 losing 0.03% at 1.0989 and a break below 1.0966 (low Sep.23) would target 1.0925 (2019 low Sep.3) en route to 1.0839 (monthly low May 11 2017). On the flip side, the initial hurdle emerges at 1.1029 (21-day SMA) followed by 1.1109 (monthly high Sep.13) and finally 1.1163 (high Aug.26).
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