EUR/USD corrects lower and tests 1.1740 ahead of PMIs

• The leg lower in EUR/USD extends to the 1.1740 region.
• Final Manufacturing PMIs in the euro area are due later on Monday.
• US ISM Manufacturing takes centre stage later in the NA session.

Sellers remain in control of the markets at the beginning of the week and are now dragging EUR/USD to test fresh 2-day lows in the 1.1740 zone.

EUR/USD weaker on profit taking, dollar recovery

EUR/USD has started the week on the negative footing and is adding to Friday’s losses below the 1.18 yardstick, all amidst the generalized profit taking sentiment and the broad-based recovery of the greenback.

In fact, overbought conditions in EUR/USD following the July’s rally have mainly triggered the ongoing knee-jerk, which expected to meet contention I the 1.17 neighbourhood, area coincident with a Fibo level (of the 2017-2018 upside).

In the meantime, market participants continue to look to the gradual progress of the recovery in the region along with the unabated advance of the coronavirus pandemic.

Also sustaining the upbeat sentiment in the currency, speculative net longs rose to levels last seen in late December 2011 during the week ended on July 28, according to the latest CFTC Positioning Report.

Later in the session, the final Manufacturing PMIs in the euro bloc are due. Across the pond, the ISM Manufacturing should grab all the attention seconded by Markit’s final gauge for the month of July and speeches by FOMC’s Bullard and Evans.

What to look for around EUR

EUR/USD recorded fresh tops just above the 1.19 yardstick at the end of last week, confirming once again the solid momentum around both the single currency and the rest of its risky peers. The sharp move up, while largely triggered by broad-based dollar-selling, has found extra sustain in auspicious results from the domestic docket, in turn supporting further the view of a strong economic recovery following the coronavirus fallout. Also lending wings to the momentum around the euro, the recently clinched deal on the European Recovery Fund helped putting political fears within the region to rest (for now), while the solid position of the current account in the region adds to the rally.

EUR/USD levels to watch

At the moment, the pair is losing 0.19% at 1.1753 and faces immediate support at 1.1709 (38.2% Fibo of the 2017-2018 rally) followed by 1.1495 (monthly high Mar.9) and finally 1.1448 (50% Fibo of the 2017-2018 rally). On the other hand, a breakout of 1.1909 (2020 high Jul.31) would target 1.1996 (high May 14 2018) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally).