EUR/USD struggles for direction around 1.1670, focus on data

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  • EUR/USD remains under pressure well below 1.1700.
  • The sentiment in euro remains sour following the ECB event.
  • German Retail Sales contracted 2.2% MoM in September.

The downside pressure around the single currency remains well in place for yet another session and prompts EUR/USD to keep business well below the 1.1700 mark.

EUR/USD offered post-ECB, looks to data

EUR/USD extends the leg lower on Friday, shedding ground uninterruptedly since Monday and meeting contention around the 100-day SMA in the mid-1.1600s so far this week.

Spot sees its decline exacerbated as market participants continue to digest the recent dovish tone from the European Central Bank (ECB) at its event on Thursday.

It is worth recalling that the central bank is expected to announce further accommodative measures at the December meeting. The ECB also reiterated that the economic recovery is losing momentum and it will “recalibrate its instruments” in response to the release of updated staff macroeconomic projections, also in the last month of the year.

Pretty interesting session data wise, with the German high street losing momentum in September following the 2.2% monthly contraction in the retail sales. In Spain, the economy is expected to have expanded 16.7% in Q3, while preliminary inflation figures in France see the CPI contracting 0.1% MoM and staying flat from a year earlier in October. Still in the euro area, flash German and EMU Q3 GDP results come up next seconded by the preliminary CPI and unemployment rate in the broad euro region. In addition, ECB’s Y.Mersh and L.De Guindos are due to speak.

What to look for around EUR

EUR/USD loses momentum and retests the mid-1.1600s against the backdrop of a persistent inflows into the safe haven universe. The outlook on EUR/USD still remains positive, however, and bearish moves are deemed as corrective only. Further out, the positive bias in the euro remains underpinned by auspicious results from domestic fundamentals (despite momentum appears somewhat mitigated in several regions), although the now dovish stance from the ECB could favour extra weakness in the short-term. Supporting the euro still remains the solid position of the EMU’s current account. In addition, the probable “blue wave” following the US elections is deemed as a negative driver for the greenback and carries the potential to lend extra legs to the pair in the longer run.

EUR/USD levels to watch

At the moment, the pair is losing 0.03% at 1.1669 and faces the next support at 1.1650 (monthly low Oct.29) followed by 1.1612 (monthly low Sep.25) and finally 1.1495 (monthly high Mar.9). On the other hand, a breakout of 1.1880 (monthly high Oct.21) would target 1.1917 (high Sep.10) en route to 1.1965 (monthly high Aug.18).

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