- EUR/USD loses the grip and tests daily lows near 1.1750.
- President Trump’s proposal on stimulus bill disappoints markets.
- US Core CPI rose 0.2% MoM, matching expectations.
The selling bias around the European currency gathers extra steam and drags EUR/USD to fresh lows in the 1.1750/45 band on Tuesday.
EUR/USD weaker on stimulus news
EUR/USD accelerates the downside after news cited President Trump’s proposal for an extra stimulus package to support the economy fell significantly short of expectations. Despite this news, House Speaker Pelosi showed confidence that a deal will be reached eventually.
The offered stance in EUR/USD is also reinforced by disappointing results from the latest ZEW survey in Germany and the broader Euroland, where the Economic Sentiment unexpectedly retreated to 56.1 and 52.3, respectively, in October. These results add to the idea that the recovery post-coronavirus crisis could be stalling or that optimism among market participants is debilitating.
Across the pond, inflation figures showed the headline CPI rose 0.2% MoM and 1.4% YoY, while Core prices rose 0.2% inter-month and 1.7% on a yearly basis. In addition, the NFIB Index ticked to 104.0 in September.
What to look for around EUR
EUR/USD has finally surpassed the 1.1800 yardstick although the up move run out of steam in the 1.1830 region, sparking the current leg lower. The pair’s outlook still remains constructive, however, and bearish moves are deemed as corrective only. Further out, the positive bias in the euro remains underpinned by auspicious results from domestic fundamentals (which have been in turn supporting further the view of a strong economic recovery after the slump in the activity during the spring), the so far cautious stance from the ECB and the solid position of the EMU’s current account.
EUR/USD levels to watch
At the moment, the pair is losing 0.49% at 1.1752 and faces immediate contention at 1.1709 (38.2% Fibo of the 2017-2018 rally) seconded by 1.1612 (monthly low Sep.25) and finally 1.1495 (monthly high Mar.9). On the upside, a breakout of 1.1830 (monthly high Oct.9) would target 1.1917 (high Sep.10) en route to 1.1965 (monthly high Aug.18).
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