- EUR/USD advances further north of 1.1700 on Monday.
- The dollar faces increasing selling pressure after recent tops.
- German, EMU flash Manufacturing PMIs eased in August.
The European currency regains the smile and lifts EUR/USD well past the 1.1700 mark at the beginning of the week.
EUR/USD up on USD weakness
Renewed optimism in the risk complex now pushes EUR/USD further north of 1.1700 the figure, reaching new 3-day highs at the same time.
In the meantime, the offered note remains unchanged around the greenback as investors seem to capitalize part of the strong gains recorded in past sessions, including new YTD peaks in the US Dollar Index (DXY).
The fresh buying interest in the euro re-emerges despite preliminary PMIs in the core Euroland came in below expectations for the month of August, receding at the same time from the previous readings.
Still in the euro area, the European Commission will release its flash Consumer Confidence gauge for the current month later in the session. Across the pond, the Chicago Fed Index is due in the first turn seconded by preliminary PMIs, Existing Home Sales and short-term Bill auctions.
What to look for around EUR
EUR/USD recorded new lows near 1.1660 during last week, keeping the monthly downtrend well in place and losing around 2% since the beginning of August, when it used to flirt with 1.1900. The recent leg lower in the pair comes after another rejection from the 1.1880/1.1900 band and follows the solid march of 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.
Key events in the euro area this week: Flash PMIs (Monday) – Final German Q2 GDP (Tuesday) – German IFO (Wednesday) – German GfK Consumer Confidence, ECB Accounts (Thursday).
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 gaining 0.26% at 1.1729 and faces the next hurdle at 1.1804 (weekly high Aug.13) followed by 1.1829 (50-day SMA) and finally 1.1908 (monthly high Jul.30). On the other hand, a breakdown of 1.1663 (2021 low Aug.20) would target 1.1612 (monthly low Oct.20 2020) en route to 1.1602 (monthly low Nov.4 2020).
