- EUR/USD fades the earlier spike to the 1.1800 level.
- ECB-speak, EcoFin meeting in the limelight later in the session.
- Fed’s Powell will be the salient event later in the NA docket.
The single currency is facing some downside pressure on turnaround Tuesday and forces EUR/USD to test the area of daily lows near 1.1760.
EUR/USD now looks to Lagarde, Powell
EUR/USD meets a tough hurdle in multi-day peaks around the key 1.1800 neighbourhood for the time being, coming under some selling pressure soon afterwards.
The greenback, in the meantime, shows signs of a tepid recovery against the backdrop of alternating risk appetite trends and ahead of the speech by Fed’s Powell later on Tuesday.
In her pre-recorded comments for the WSJ, Christine Lagarde leaves the door open for extra stimulus – including interest rate cuts – to support the economy in the euro area, and reiterates the asymmetry of the ongoing recovery, adding that it remains incomplete and uncertain.
In the euro docket, Construction PMIs came in mixed in the euro bloc, while German Factory Orders expanded more than expected during August, showing that the recovery keeps well on track. In addition, ECB’s De Guindos will speak at the EcoFin meeting, Board member Lane speaks at the NABE event and Chief Largarde will participate in a video conference at an ESM event.
What to look for around EUR
EUR/USD appears to have met a strong barrier in the 1.1800 area so far, where converge the 55-day SMA and just above the immediate resistance line. The pair’s outlook still remains constructive 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, the solid position of the EMU’s current account and hopes of extra stimulus in the US economy.
EUR/USD levels to watch
At the moment, the pair is retreating 0.03% at 1.1777 and faces immediate contention at 1.1709 (38.2% Fibo of the 2017-2018 rally) followed by 1.1612 (monthly low Sep.25) and finally 1.1495 (monthly high Mar.9). On the upside, a break above 1.1800 (weekly high Oct.5) would target 1.1917 (high Sep.10) en route to 1.1965 (monthly low Aug.18)
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