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  • EUR/USD moves closer to 1.19 as Lagarde’s presser is under way.
  • The ECB said there is no need to overreact to recent gains in the pair.
  • ECB reiterated the activity levels are still below pre-COVID levels.

The buying interest around the single currency is now gathering further traction and pushes EUR/USD back to the proximity of the key 1.19 mark.

EUR/USD looks firmer, bolstered by the ECB

EUR/USD advanced to weekly tops to levels just shy of 1.1900 the figure after President Christine Lagarde ruled out any overreaction to the recent gains in the European currency.

However, Lagarde stressed that the central bank would still be monitoring the exchange rate and its potential impact on the inflation. She added that the current rebound in the economic activity falls in line with the bank’s forecasts although the activity levels remain below those before the coronavirus crisis.

Speaking about forecasts, the ECB now sees the economy of the bloc contracting 8% this year and expanding 5% in 2021. Regarding inflation, the central bank expects consumer prices to rise 0.3% in 2020 and 1% during next year.

In the meantime, the greenback remains well under pressure for the second session in a row after weekly Claims rose more than estimated by 884K (vs. 850K exp.). additional US data saw Producer Prices rising 0.3% on a monthly basis in August, surpassing consensus.

What to look for around EUR

EUR/USD managed to test the area just above 1.20 the figure at the beginning of the month. However, bulls failed to extend the rally further north, sparking a leg lower to the sub-1.18 instead. Looking at the broader picture, the bearish view on the dollar continues to sustain the underlying constructive bias in the pair, all accompanied by the improved sentiment in the risk-associated universe, auspicious results from domestic fundamentals – which have been in turn supporting further the view of a strong economic recovery following the coronavirus crisis – as well as a calmer US-China trade front. The solid positive stance in the speculative community also underpins the constructive outlook in the euro.

EUR/USD levels to watch

At the moment, the pair is gaining 0.62% at 1.1876 and a breakout of 1.1965 (monthly high Aug.18) would target 1.2011 (2020 high Sep.1) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally). On the flip side, immediate contention is located at 1.1751 (monthly low Sep.9) seconded by 1.1709 (38.2% Fibo of the 2017-2018 rally) and finally 1.1695 (monthly low Aug.3).