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  • EUR/USD drops as low as 1.1066 earlier today.
  • Prospects of ECB easing keep weighing on EUR.
  • US advanced Consumer Sentiment next on the docket.

The selling pressure around the shared currency remains unabated so far on Friday and is now dragging EUR/USD back to the 1.1070/60 band, levels last seen in May 2017.

EUR/USD weaker on ECB, USD gains

The pair is trading on the defensive since Tuesday, turning negative for the month at the same time after breaking below the multi-session consolidative theme around the 1.1180/70 region.

Considerable selling pressure emerged among market participants in response to recent comments by ECB’s O.Rehn, who suggested that the new ECB stimulus package would likely overshoot markets’ expectations. It is worth noting that the ECB could most likely deliver these new measures at the September gathering.

Additionally, positive results from US data releases have been also lending extra legs to the buck’s rally, hurting further the mood surrounding spot.

Earlier today, EMU trade surplus shrunk to €20.6 billion albeit came in above estimates. In the US, Housing Starts expanded less than expected in July by 1.191 million units and Building Permits rose by 1.336 million units, surpassing forecasts. Next of relevance will be the flash print of US Consumer Sentiment measured by the U-Mich index.

What to look for around EUR

EUR has finally succumbed to the downside pressure and is testing the 1.1100 area and below on the back of shrinking ‘repatriation’ forces and renewed buying interest surrounding the buck. That said, sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. This scenario has been confirmed further this week following poor results from the euro-docket, adding to the unremitting deterioration of the economic outlook in the region. On another front, Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later.

EUR/USD levels to watch

At the moment, the pair is losing 0.32% at 1.1071 and faces the next support at 1.1066 (low Aug.16) seconded by 1.1026 (2019 low Aug.1) and finally 1.0839 (monthly low May 11 2017). On the upside, a break above 1.1153 (21-day SMA) would target 1.1229 (55-day SMA) en route to 1.1282 (high Jul.19).