- EUR/USD gives away part of Friday’s moderate advance.
- Softer-than-expected Chinese data results weigh on sentiment.
- The FOMC Minutes will grab all the attention later in the week.
The recent bullish run in EUR/USD seems to have met quite a decent resistance around the 1.1800 yardstick on Monday.
EUR/USD offered on dollar recovery
EUR/USD starts the week on the back footing and partially fades Friday’s strong advance in a context where investors’ mood seems to favour the dollar so far.
Disappointing results in the Chinese calendar in early trade tilted the sentiment to the dollar’s side in detriment of the risk-associated assets, motivating the euro and the rest of its peers to shed some ground at the beginning of the week.
In addition, COVID concerns remain unabated, particularly those linked to the fast spread of the Delta variant and its potential impact on global growth prospects, which is also another source of strength supporting the buck.
Nothing scheduled data wise in the euro area on Monday, while the Empire State Index and June’s TIC Flows will be released across the pond.
What to look for around EUR
EUR/USD regained upside traction after re-visiting the area of YTD lows in the 1.1700 neighbourhood during last week and now flirts with the key 2020-2021 line near the 1.1800 zone. The monthly leg lower in the pair comes after another failed attempt to break above the tough resistance band at 1.1880/90 and follows the quite solid prospect for the dollar, always backed mainly on tapering 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 the upside limited in spot despite auspicious results from key fundamentals and the persistent high morale in the region.
Key events in the euro area this week: Flash Q2 EMU GDP (Tuesday) – Final EMU CPI (Wednesday).
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 0.07% at 1.1786 and a breakdown of 1.1705 (monthly low Aug.11) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low). On the other hand, the next up barrier is located at 1.1874 (50-day SMA) seconded by 1.1908 (monthly high Jul.30) and finally 1.1975 (weekly high Jun.25).
