- EUR/USD loses further ground and tests lows near 1.1850.
- The dollar’s recovery is seen behind the corrective downside.
- German Retail Sales contracted 0.9% MoM in July.
Following recent YTD tops, EUR/USD has embarked in a correction lower and met initial support in the mid-1.1800s on Wednesday.
EUR/USD now looks to data
EUR/USD managed to briefly surpass the psychological 1.20 barrier on Tuesday. The move up, however, lacked follow through and the pair ended up the session in the negative territory.
Positive results from the US docket lent fresh oxygen to the dollar on Tuesday, while some profit taking sentiment in the risk-associated universe on Wednesday has also forced spot to abandon the area of recent tops and breach the 1.19 support.
Data wise in Euroland, German Retail Sales contracted 0.9% MoM during July and Producer Prices in the broader euro bloc expanded at a monthly 0.6% in August.
Later in the session, the ADP report is due in the first turn seconded by July’s Factory Orders and the Fed’s Beige Book. In addition, FOMC’s Williams, Mester and Kashkari are due to speak.
What to look for around EUR
EUR/USD broke above the multi-day rangebound theme last week and managed to test the area just above 1.20 the figure on Tuesday. In the meantime, the sell-off in the dollar gives extra legs to the rally that started in July, 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 US-China positive headlines. Also lending wings to the momentum around the euro appear the deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region. In addition, the speculative community has supported the bullish stance on the euro for yet another week (as per the latest CFTC positioning report).
EUR/USD levels to watch
At the moment, the pair is losing 0.36% at 1.1868 and faces the next support at 1.1772 (weekly low Aug.26) seconded by 1.1754 (weekly low Aug.21) and finally 1.1695 (monthly low Aug.3). On the upside, a move above 1.2011 (2020 high Sep.1) would target 1.2062 (23.6% Fibo of the 2017-2018 rally) en route to 1.2413 (monthly high Apr.2018).
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