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  • EUR/USD is orbiting around 1.0980 at the beginning of the week.
  • German Factory orders contracted 0.6% MoM during August.
  • Trade, FOMC minutes, US CPI next of relevance in the docket.

EUR/USD is hovering around Friday’s close in the 1.0980 region at the beginning of the week.

EUR/USD focused on data, trade talks

The rally in the pair appears to have met strong resistance in the 1.10 neighbourhood so far, where sits the 21-day SMA. Indeed, bulls failed to extend the recovery beyond 1.10 the figure amidst increasing cautiousness on the upcoming US-China trade talks and key events later this week.

In the meantime, markets’ focus is expected to shift to the upcoming US-China high-level trade talks on Thursday and Friday in Washington, all amidst expectations of a positive outcome as well as increasing skepticism among traders. Supporting the view that a trade deal this week appears unlikely, latest news cited Chinese negotiators could refuse to address key issues such as subsides and other structural issues linked to the country’s trade surplus.

In today’s docket, German data once again surprised to the downside after Factory Orders contracted at a monthly 0.6% during August. Later in the session, EMU’s Investor Confidence gauged by the Sentix Index is due. Nothing scheduled across the pond, although CPI figures, the FOMC minutes and speeches by Fed’s Powell and several other FOMC members are expected to keep the attention on the buck in the next days.

What to look for around EUR

The pair keeps the weekly recovery well and sound so far today, retaking levels close to the key 1.10 barrier on the back of increasing selling pressure hitting the Greenback. The up move in the pair, however, is seen as corrective only, as the slowdown in the region stays far from abated and carries the potential to deteriorate further, as per the latest PMIs in core Euroland and despite the lacklustre improvement in a couple of German sentiment gauges. Speaking of Germany, the likeliness that the country could slip back into recession in the third quarter just adds to the already gloomy panorama for the bloc and weighs further on the single currency. The unremitting slowdown in the region does nothing but justify the ‘looser for longer’ monetary stance by the ECB. On another front, potential US tariffs on imports of EU cars remain well on the table, while the Brexit limbo and UK politics adds to the ongoing concerns.

EUR/USD levels to watch

At the moment, the pair is advancing 0.02% at 1.0979 and faces the next resistance at 1.0996 (21-day SMA) followed by 1.1064 (55-day SMA) and finally 1.1109 (monthly high Sep.13). On the downside, a breakdown of 1.0879 (2019 low Oct.1) would target 1.0839 (monthly low May 11 2017) en route to 1.0569 (monthly low Apr.10 2017).