- EUR/USD fades the earlier spike to 1.1110/15.
- The greenback stays bid above the 98.00 mark.
- EMU final August CPI came in below estimates.
After moving to the 1.1110/15 band earlier in the session, the upside momentum in EUR/USD run out of steam and it is now returning to the 1.1100 neighbourhood.
EUR/USD looks to ECB, USD-dynamics
Occasional bullish attempts in the pair remain unable to gather serious traction, as prospects of ECB easing at the next month’s meeting keep weighing on investors’ sentiment.
There is no news on the US-China trade front other than usual rhetoric from President Trump, ranging from ‘the deal is just around the corner’ to ‘the US is not ready to make a deal’. Markets, so far, have been practically ignoring the latest developments.
EUR, however, remains vigilant on news coming from Germany and the likeliness that the government could announce some fiscal stimulus in order to boost the economy.
In the data space, final inflation figures for the month of August in Euroland showed headline prices contracted 0.5% MoM and rose 1.0% on a yearly basis, both prints missing estimates. Later in the week, the focus of attention will be on the FOMC minutes(Thursday) and the speech by Fed’s J.Powell at the Jackson Hole Symposium on Friday.
What to look for around EUR
EUR has finally succumbed to the downside pressure and is testing the area below the 1.1100 handle on the back of shrinking ‘repatriation’ forces, renewed buying interest surrounding the buck and expectations of ECB easing. That said, sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. This scenario has been confirmed as of late following poor results from the euro-docket, adding to the unremitting deterioration of the economic outlook in the region. On another front, Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later.
EUR/USD levels to watch
At the moment, the pair is gaining 0.07% at 1.1097 and a break above 1.1148 (21-day SMA) would target 1.1227 (55-day SMA) en route to 1.1282 (high Jul.19). On the flip side, the next support emerges at 1.1066 (low Aug.16) seconded by 1.1026 (2019 low Aug.1) and finally 1.0839 (monthly low May 11 2017).
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