- EUR/USD breaks below the key support at 1.18 on Tuesday.
- The dollar’s rally remains well and sound in the global markets.
- EMU’s flash Q2 GDP came in at -11.8 QoQ and -14.7 YoY.
The selling bias remains unaltered around the single currency in the first half of the week, once again dragging EUR/USD to fresh lows in the sub-1.1800 area.
EUR/USD offered on USD-buying
EUR/USD has left behind the initial optimism and is now adding to Monday’s losses below the key support at 1.18 the figure on Tuesday.
The persistent buying bias around the greenback keeps weighing on the euro and the rest of the risk complex amidst the renewed risk aversion sentiment and rising cautiousness ahead of the ECB event on Thursday.
In the domestic calendar, another estimate of Q2 GDP now sees the economy of the bloc contracting nearly 12% QoQ and almost 15% on an annualized basis. Additional data in the region expect the Employment Change to drop almost 3% QoQ during the April-June period.
Across the Atlantic, the NFIB index ticked higher to 100.2 for the month of August, while the IBD/TIPP Economic Optimism index is coming up next.
What to look for around EUR
EUR/USD managed to test the area just above 1.20 the figure at the beginning of the month. However, bulls failed to extend the rally further north, sparking a leg lower to the area below the 1.18 level so far instead. In the broader picture, the bearish view on the dollar continues to sustain the underlying constructive bias in the pair, 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.
EUR/USD levels to watch
At the moment, the pair is losing 0.25% at 1.1782 and faces the next support at 1.1754 (weekly low Aug.21) seconded by 1.1709 (38.2% Fibo of the 2017-2018 rally) 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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