EUR/USD trims gains around 1.1770 as dollar recovers

• EUR/USD remains bid in the 1.1770 region on Tuesday.
• Risk-on sentiment keeps bolstering the daily upside.
• German, EMU Economic Sentiment surpassed estimates.

Following a drop to the 1.1720 region earlier in the European morning, EUR/USD has managed to retake the 1.18 neighbourhood along with the improvement in the risk universe.

EUR/USD bid on data, risk trends

EUR/USD’s upside momentum is now running out of steam amidst a recovery attempt in the US dollar.

In fact, the pair briefly clinched fresh tops just above 1.18 the figure during early trade. This move, however, lacked follow through and motivated the pair to scale back some ground and recede to the current 1.1770 zone.

Markets’ sentiment, in the meantime, keeps leaning towards the riskier assets on the back of positive news around a coronavirus vaccine registered by Russia and firm hopes of a deal regarding another US stimulus bill.

Earlier in the European morning, the German/EMU Economic Sentiment tracked by ZEW showed yet another rebound for the current month, reinforcing the view of a strong rebound in the economic activity following the lockdown measures in past months.

What to look for around EUR

EUR/USD pushed higher and recorded new highs near 1.1920 in the second half of last week, triggering a corrective move to lows near 1.1720 so far. The July-August rally, while largely triggered by broad-based dollar-selling and improved sentiment in the risk-associated universe, found extra sustain in auspicious results from domestic fundamentals, which have been in turn supporting further the view of a strong economic recovery in the wake of the coronavirus fallout. Also lending wings to the momentum around the euro appear the recently clinched deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region.

EUR/USD levels to watch

At the moment, the pair is advancing 0.31% at 1.1773 and a breakout of 1.1916 (2020 high Aug.6) would target 1.1996 (high May 14 2018) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally). On the other hand, immediate contention is located at 1.1695 (weekly low Aug.3) followed by 1.1495 (monthly high Mar.9) and finally 1.1448 (50% Fibo of the 2017-2018 rally).