EUR/USD flirting with daily highs, still below 1.1200

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  • EUR/USD goes for another test of daily highs near 1.1180.
  • German flash GDP showed the economy is contracting in Q2.
  • EMU advanced Q2 GDP sees economy gaining 0.2% QoQ.

The shared currency is regaining some of its shine on Wednesday and is now pushing EUR/USD to the 1.1180 region, or session tops.

EUR/USD bid after data, looks to risk trends

The pair is extending the erratic performance so far today, with the weekly upside capped by the 200-hour SMA in the 1.1180/85 band.

Spot saw its upside momentum trimmed on Tuesday as US-China trade concerns eased somewhat after the Trump Administration delayed the implementation of tariffs on some Chinese products and removed others from the list.

In today’s docket, the German economy is seen contracting 0.1% QoQ in Q2, according to flash GDP figures out earlier in the session. By the same gauge, Euroland is expected to expand 0.2% inter-quarter during the same period. Additional data in the euro area saw Industrial Production contracting 1.6% from a month earlier in June and advanced Employment Change is seen up 0.2% QoQ during the April-June period.

What to look for around EUR

The reluctance of EUR to edge lower in the current risk-off environment could be reflected in ‘repatriation’ forces currently at play as well as the potential funding stance of the currency. Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later. 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. In the meantime, the unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen capping extra gains and are also lending extra support to the dovish stance of the ECB.

EUR/USD levels to watch

At the moment, the pair is advancing 0.09% at 1.1180 and a breakout of 1.1232 (55-day SMA) would target 1.1282 (high Jul.19) en route to 1.1291 (200-day SMA). On the other hand, the next down barrier emerges at 1.1161 (low Aug.12) seconded by 1.1101 (monthly low Jul.25) and finally 1.1026 (2019 low Aug.1).

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