- EUR/USD regains some composure and approaches 1.1900.
- European stock markets opened on a mixed tone on Tuesday.
- German ZEW, EMU flash Q2 GDP next of note in the docket.
The single currency regains the smile and now lifts EUR/USD back to the 1.1880 region on turnaround Tuesday.
EUR/USD now re-targets 1.1900 and above
EUR/USD has quickly left behind Monday’s pessimism, as bulls regain the upper hand and once again shift their focus to the area of recent tops beyond 1.1900 the figure.
The dollar, in the meantime, fades the earlier advance and retreats to the negative territory, relegating at the same time the US Dollar Index (DXY) to the 92.00 neighbourhood despite the better note of US yields.
In the domestic calendar, the Economic Sentiment tracked by the ZEW survey in Germany is due in the first turn seconded by another revision of the EMU GDP during the April-June period. Earlier in the session, the German Industrial Production expanded at a monthly 1.% in July, more than expected.
No data releases scheduled across the pond other than auctions of the 3m, 6m and 3y notes.
What to look for around EUR
The upside momentum in EUR/USD took another step and re-visited the area past 1.1900 on Friday, although the move was ephemeral. Looking at the broader picture, the ongoing recovery in EUR/USD from YTD lows (August 20) tracks the improvement in the risk complex as well as the intense corrective downside in the buck. However, and despite the recent hawkish tilt from ECB-speakers regarding scaling back the bank’s stimulus programme sooner rather than later, consensus seems to be shaping up around the likeliness that Lagarde could talk down these tapering hopes at the ECB meeting later in the week, which in turn carries the potential to cap the upside in the pair.
Key events in the euro area this week: German Industrial Production, German/EMU ZEW survey, EMU flash Q2 GDP (Tuesday) – German Trade Balance, ECB meeting (Thursday) – Final German CPI, EuroGroup meeting (Friday).
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 jitters to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency. ECB tapering speculations.
EUR/USD levels to watch
So far, spot is gaining 0.06% at 1.1875 and faces the next up barrier at 1.1909 (monthly high Sep.3) followed by 1.1948 (100-day SMA) and finally 1.2000 (psychological mark, 200-day SMA). On the other hand, a break below 1.1813 (55-day SMA) would target 1.1663 (2021 low Aug.20) en route to 1.1612 (monthly low Oct.20 2020).
