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  • EUR/USD extends the corrective downside to sub-1.18 levels.
  • The dollar keeps recovering ground after recent +2-year lows.
  • Final Services PMIs came in broadly in line in the euro area.

The selling bias remains unchanged around the single currency in the second half of the week, with EUR/USD briefly testing 5-day lows in the 1.1790/85 band.

EUR/USD looks to USD, data

EUR/USD is down for the third consecutive session on Thursday, coming under renewed and strong selling pressure in response to the pick-up in the demand for the greenback and profit taking in the riskier assets.

In the meantime, USD-dynamics continue to be the exclusive driver for the price action in the global markets amidst the unremitting advance of the coronavirus pandemic, hopes of an effective COVID-19 vaccine and the gradual recovery of the economy across the world.

In the euro docket, final Markit’s Services PMI came in broadly in line with the preliminary readings for the month of August, while Retail Sales in the euro region are coming up next. Across the ocean, Challenger Jobs Cuts are due seconded by trade balance results, weekly claims, Markit’s Services PMI and the key ISM Non-Manufacturing.

What to look for around EUR

EUR/USD broke above the multi-day rangebound theme last week and managed to test the area just above 1.20 the figure on Tuesday. In the meantime, the sell-off in the dollar gives extra legs to the rally that started in July, all accompanied by the improved sentiment in the risk-associated universe, auspicious results from domestic fundamentals – which have been in turn supporting further the view of a strong economic recovery following the coronavirus crisis – as well as US-China positive headlines. Also lending wings to the momentum around the euro appear the 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. In addition, the speculative community has supported the bullish stance on the euro for yet another week (as per the latest CFTC positioning report).

EUR/USD levels to watch

At the moment, the pair is losing 0.31% at 1.1817 and faces the next support at 1.1789 (weekly low Sep.3) seconded by 1.1754 (weekly low Aug.21) and finally 1.1695 (monthly low Aug.3). On the other hand, a move above 1.2011 (2020 high Sep.1) would target 1.2032 (23.6% Fibo of the 2017-2018 rally) en route to 1.2413 (monthly high Apr.17 2018).

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