- EUR/USD comes down to test recent lows around 1.1070.
- The better tone in the greenback weighs on the pair.
- German Factory Orders surprised to the upside in September.
The shared currency is struggling for direction on Wednesday, prompting EUR/USD to remain so far cautious around the 1.1070 region.
EUR/USD weaker on USD-buying
After a negative start of the week, the pair appears to have met some decent support in the area of last week’s lows near 1.1070, always amidst a moderate rebound in the demand for the buck.
In fact, the improved mood in the risk-complex in response to positive developments from the US-China trade front has given extra oxygen to the greenback via higher yields and persistent outflows from the safe havens like the Japanese yen, all weighing down on spot and forcing it to abandon the upper end of the range in the 1.1170 region.
Today, some support for EUR came from the German docket after Factory Orders rebounded markedly 1.3% during September, bringing in some relief to the beleaguered sector.
Still in Euroland, final Services PMIs are due later today along with Retail Sales in the broader euro area. Across the pond, Non-farm Productivity and Unit Labor Costs are expected along with the EIA’s report on US crude oil inventories. Additionally, Chicago Fed C.Evans, Philly Fed P.Harker and NY Fed J.Williams are all due to speak.
What to look for around EUR
The pair has come under extra selling pressure since the beginning of the week on the back of the renewed buying interest in the buck and the broad-based improvement in the sentiment around the riskier assets. In the meantime, the failure to break above October’s high near 1.1180 triggered a move lower to the 1.1070 region, coincident with recent lows. In spite of occasional positive results in the euro docket, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.
EUR/USD levels to watch
At the moment, the pair is gaining 0.05% at 1.1079 and faces the next up barrier at 1.1119 (100-day SMA) followed by 1.1179 (monthly high Oct.21) and finally 1.1186 (61.8% Fibo of the 2017-2018 rally). On the downside, a breakdown of 1.1063 (monthly low Nov.5) would target 1.1043 (55-day SMA) en route to 1.0925 (low Sep.3).
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