EUR/USD keeps 1.1200 and above despite upbeat US CPI data
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EUR/USD keeps 1.1200 and above despite upbeat US CPI data

  • EUR/USD stays above the 1.1200 on positive US CPI.
  • The Greenback struggles for direction amidst higher yields.
  • US headline CPI rose 0.3% MoM during July.

The single currency keeps the buying bias unchanged on Tuesday, with EUR/USD keeping business above the 1.1200 handle in the wake of US data releases.

EUR/USD met resistance around the 55-day SMA

Spot is advancing for the third session in a row so far today, reversing the initial selling bias and moving beyond 1.1200 the figure, although a tough hurdle emerged in the 1.1230 region, where sits the 55-day SMA.

EUR stays bid despite US inflation figures tracked by the CPI surprised markets to the upside, showing headline consumer prices gaining 0.3% MoM during last month and 1.8% from a year earlier. Core prices also came in above estimates, up 0.3% MoM and 2.2% YoY.

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 gaining 0.05% at 1.1218 and a breakout of 1.1232 (55-day SMA) would target 1.1282 (high Jul.19) en route to 1.1292 (200-day SMA). On the other hand, the next support aligns 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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