EUR/USD looks sidelined around 1.1050/60

  • EUR/USD adds to Thursday’s gains in the 1.1050/60 band.
  • Risk appetite trends appear mixed on Friday.
  • German Producer Prices surprised to the downside in August.

The optimism around the single currency stays well and sound at the end of the week, with EUR/USD navigating in the 1.1050/60 band ahead of the opening bell in Euroland.

EUR/USD now looks to trade

The pair is advancing for the second session in a row on Friday as market participants continue to digest the recent FOMC event and refocus the attention on the US-China trade front.

In fact, negotiators from both parties are expected to meet again today ahead of the high-level talks at some point in early October.

In the meantime, yields of the key German 10-year reference appear to have met some strong resistance around the -0.45% area, while yields of the US-10 year note are extending the correction lower following tops near 1.90%. The move in yields has reduced the US-GE spread differential to the vicinity of 225 pts, supporting the recovery in spot as well.

In the docket, German Producer Prices contracted 0.5% inter-month during August and rose 0.3% from a year earlier, both prints coming in below expectations.

What to look for around EUR

The single currency is extending the choppy trading so far this week in the wake of the key FOMC gathering on Wednesday. EUR lost some shine following the recent peaks beyond 1.11 the figure, recorded after the ECB announced €20 billion/month in bond purchases under the re-launched QE programme. The occasional recovery in spot, however, is seen as corrective only always against the backdrop of unremitting slowdown in the region, looser for longer monetary conditions by the ECB and the likelihood that the German economy could slip into technical recession in Q3. Adding to this gloomy scenario, potential US tariffs on imports of EU cars remain well on the table, while persistent uncertainty around Brexit adds to the downbeat outlook.

EUR/USD levels to watch

At the moment, the pair is gaining 0.14% at 1.1056 and faces the initial hurdle at 1.1109 (monthly high Sep.13) seconded by 1.1163 (high Aug.26) and finally 1.1175 (100-day SMA). On the flip side, a break below 1.0990 (low Sep.16) would target 1.0925 (2019 low Sep.3) en route to 1.0839 (monthly low May 11 2017).

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