- EUR/USD fades the earlier spike to 1.1040/45.
- Monday’s correction tracks the better tone in USD.
- EMU’s Industrial Production expanded 0.6% MoM in August.
The selling bias around the European currency stays well and sound so far on Monday, with EUR/USD navigating the low-1.10s amidst some moderate recovery in the buck.
EUR/USD holds on above 1.10
The pair is seen some profit taking after three consecutive daily advances, all amidst the broader nearly-2-cents recovery from YTD lows in the 1.0880 recorded at the beginning of the month.
EUR is losing some shine today as market participants continue to digest the recently clinched partial trade deal between the US and China in the Washington talks. However, a high degree of scepticism still lingers over investors regarding how sustainable such a deal will be in the near future, not to mention President Trump’s volatile mood regarding the subject.
In the euro docket today, Industrial Production in the broader Euroland expanded more than expected at a monthly 0.6% during August, although it contracted nearly 3.0% from a year earlier. Nothing to be cheerful about here, as the sector continues to underperform amidst the generalized multi-sector deceleration affecting the bloc.
What to look for around EUR
The pair met strong resistance in the mid-1.10s, where sits the key 55-day SMA, sparking some profit taking and the ongoing retracement to the vicinity of the 1.10 support. The corrective upside, however, remains well in place for the time being and supported by the improved mood in the riskier assets and a weak Dollar. Looking at the broader picture, the relentless slowdown in the region 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. On another front, potential US tariffs on imports of EU cars remain well on the table, while the Brexit limbo and UK politics could also maintain gains somewhat limited.
EUR/USD levels to watch
At the moment, the pair is retreating 0.09% at 1.1025 and a breakdown of 1.0983 (21-day SMA) would target 1.0879 (2019 low Oct.1) en route to 1.0839 (monthly low May 11 2017). On the flip side, the next barrier emerges at 1.1051 (55-day SMA) seconded by 1.1062 (monthly high Oct.11) and finally 1.1109 (monthly high Sep.13).
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