- EUR/USD drops to fresh yearly lows in the 1.1665/60 band.
- The dollar moves to new highs in the 93.50 area.
- EMU’s Current Account surplus widened to €24 billion in June.
The selling pressure remains everything but abated around the European currency for yet another session, with EUR/USD dropping to new 2021 lows around 1.1665 during early trade.
EUR/USD weaker on dollar gains
EUR/USD remains well on the defensive, this time below the 1.1700 mark and always in response to the solid pace of the dollar.
In fact, the greenback gathered extra steam and climbed to fresh tops near 93.50 after quickly leaving behind a post- FOMC Minutes knee-jerk on Wednesday. The Committee now sees an increasing possibility of tapering the Fed’s bond-purchase programme later this year despite further progress in the labour market is still needed.
Rising speculation of QE tapering and potential rate hikes all sooner than previously estimated continues to weigh on the risk-associated assets in combination with the unabated spread of the delta variant of the coronavirus and the potential impact on global growth prospects.
In the domestic calendar, the Current Account surplus in the broader Euroland widened to €24 billion in June. Across the pond, Initial Claims are due seconded by the Philly Fed Index and the Leading Index measured by the Conference Board.
What to look for around EUR
EUR/USD extended the leg lower and recorded new 2021 lows near 1.1660, area last visited back in early November of the past year. The monthly leg lower in the pair comes after another failed attempt to break above the tough resistance band at 1.1880/1.1900 and follows the quite solid prospect for the dollar, which remains mainly propped up by tapering/interest rates speculation. On the euro side of the equation, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep spot under pressure despite auspicious results from key fundamentals and the persistent high morale in the region.
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections in September could bring some political effervescence to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency.
EUR/USD levels to watch
So far, spot is losing 0.019% at 1.1686 and a breakdown of 1.1665 (2021 low Aug.19) would target 1.1612 (monthly low Oct.20 2020) en route to 1.1602 (monthly low Nov.4 2020). On the upside, the next hurdle emerges at 1.1804 (weekly high Aug.13) followed by 1.1845 (50-day SMA) and finally 1.1908 (monthly high Jul.30).
