EUR/USD drops and tests daily lows near 1.1140

• EUR/USD loses the grip and drops to 1.1140, daily lows.
• Lack of further progress in Brexit hits sentiment.
• German Bund yields deflate from recent tops.

The upside momentum in the single currency is losing further traction on Tuesday and is dragging EUR/USD to the area of daily lows near 1.1140.

EUR/USD attention stays on Brexit, risk trends

The pair is now losing ground for the second session in a row, extending the negative start of the week and correcting further from Monday’s 2-month highs in the 1.1180 region amidst a tight trading range and absence of significant catalysts.

Spot is facing some renewed downside pressure in tandem with somewhat rising uncertainty around the Brexit negotiation, particularly exacerbated after UK PM B.Johnson’s parliamentary defeat last Saturday.

Nothing is scheduled data wise in Euroland today, while the focus of attention remains on the ECB event -the last one under Draghi’s presidency – and the release of advanced PMIs in core Euroland, both due later this week.

What to look for around EUR

The upside momentum in the pair has extended to the 1.1180 region earlier this week, where it met some strong resistance for the time being. In the meantime, the Brexit process and developments from the US-China trade front remain the exclusive drivers of the mood surrounding spot. It is worth recalling, however, that the recent positive 3-week streak in spot has been exclusively sponsored by the renewed offered bias in the Dollar and that the outlook in Euroland continues to deteriorate and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the longer run. 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 losing 0.04% at 1.1144 and a break below 1.1135 (100-day SMA) would target 1.1049 (55-day SMA) en route to 1.0925 (low Sep.3). On the upside, the next hurdle is located at 1.1171 (monthly high Oct.18) seconded by 1.1186 (61.8% Fibo of the 2017-2018 rally) and finally 1.1206 (200-day SMA).