- EUR/USD loses some upside traction, back near 1.1150.
- Attention remains on the Brexit front.
- German Producer Prices rose 0.1% MoM in September.
The upside momentum in the single currency appears to be taking a breather at the beginning of the week, with EUR/USD receding to the mid-1.1100s on the back of the better mood in the Greenback.
EUR/USD focused on data, Brexit
The rally in the pair stays unabated despite the ongoing corrective pullback from last week’s fresh 2-month peaks in the 1.1170/75 band against the pick up in the demand for the buck following developments from China and the UK.
In fact, the latest Chinese GDP figures for the July-September period has somewhat disappointed market expectations along with today’s decision by the PBoC to leave the key reference rate unchanged at 4.20%.
In addition, hopes of a Brexit deal have been slashed on Saturday after the UK Parliament vote, inflicting PM B.Johnson another defeat and forcing him to seek an extension of the October deadline (to January 31 2020).
Data wise today in the euro area, German Producer Prices came in above estimates after rising 0.1% MoM during September and contracting 0.1% from a year earlier. Later in the week, key advanced PMIs will be the salient event along with the ECB meeting (Draghi’s last one as President).
What to look for around EUR
The upside momentum in the pair has extended to the vicinity of the 1.1200 area last week against the backdrop of a weaker Dollar and optimism from the Brexit negotiations and the US-China trade front. However, it is worth recalling that the recent positive 3-week streak in spot has been exclusively sponsored by the renewed offered bias in the Dollar and that the outlook in Euroland continues to deteriorate and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the longer run. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.
EUR/USD levels to watch
At the moment, the pair is losing 0.09% at 1.1159 and a break below 1.1137 (100-day SMA) would target 1.1050 (55-day SMA) en route to 1.0925 (low Sep.3). On the upside, the next hurdle is located at 1.1171 (monthly high Oct.18) seconded by 1.1186 (61.8% Fibo of the 2017-2018 rally) and finally 1.1207 (200-day SMA).
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