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  • EUR/USD retreats from tops, back near 1.0920.
  • The Greenback extends the rebound after poor ISM on Tuesday.
  • Markets’ attention remains on the US ADP report.

After recent tops in the 1.0940/50 band, EUR/USD appears to have met some significant selling interest and is now receding to the 1.0920 region.

EUR/USD up on weaker USD, looks to data

The pair managed to rebound from Tuesday’s YTD lows in the 1.0880 area in response to the wave of selling orders hitting the Greenback after the critical ISM manufacturing dropped to a decade-low during September.

The poor results from the ISM have re-ignited concerns that a recession in the US economy could be in the offing and could probably emerge at some point in mid-2021. In addition US yields gapped lower, reducing the spread differential vs. their European peers, particularly the German Bund.

In the meantime, the recent up move in the pair was exclusively on the back of renewed USD-weakness, as recent inflation figures in the euro area showed that pressure on consumer prices remain muted, keeping concerns on the domestic front well unabated.

Nothing scheduled today in the euro docket, whereas the ADP report and speeches by FOMC’s Barkin, Harker and Williams are all due across the pond.

What to look for around EUR

EUR dropped to new 2-year lows vs. the Greenback in the 1.0880/75 band earlier in the week, as investors’ sentiment remains sour and without any hint of getting any better, at least in the near/medium term. In fact, the slowdown in the euro area stays far from abated and carries the potential to deteriorate further, as per the latest PMIs in core Euroland and despite the lacklustre improvement in a couple of German sentiment gauges. Speaking of Germany, the likeliness that the country could slip back into recession in the third quarter just adds to the already gloomy panorama for the bloc and weighs further on the single currency. The unremitting slowdown in the region does nothing but justify the ‘looser for longer’ monetary stance by the ECB. On another front, potential US tariffs on imports of EU cars remain well on the table, while the Brexit limbo and UK politics adds to the ongoing concerns.

EUR/USD levels to watch

At the moment, the pair is retreating 0.07% at 1.0925 and a breach of 1.0879 (2019 low Oct.1) would target 1.0839 (monthly low May 11 2017) en route to 1.0569 (monthly low Apr.10 2017). On the upside, the next hurdle aligns at 1.1002 (21-day SMA) followed by 1.1109 (monthly high Sep.13) and finally 1.1163 (high Aug.26).