EUR/USD looks for direction near 1.1200 ahead of FOMC
|- EUR/USD approaches the 1.1200 handle on Wednesday.
- German Producer Prices surprised to the downside in May.
- Further sideline trading is expected ahead of FOMC event.
The shared currency is alternating gains with losses in the middle of the week, with EUR/USD gyrating around the 1.1200 handle amidst a generalized rangebound theme.
EUR/USD looks to FOMC meeting
Spot remains vulnerable below 1.1200 the figure following yesterday’s dovish message from President Draghi in Sintra.
It is worth recalling that Draghi left the door open for further stimulus via interest rate cuts and extra asset purchases in case the outlook on the region deteriorates further and inflation pressure loses traction. That said, the ECB has joined the recent shift in the other G10 central banks to a more accommodative stance, always on the back of increasing uncertainty on the US-China trade front.
In today’s calendar, German Producer Prices contracted at a monthly 0.1% during May and rose 1.9% from a year earlier. Later in the day, EMU Current Account figures for the month of April are due seconded by May’s Construction Output and the speech by EC’s J.C.Juncker in Sintra. In addition, President Draghi will give closing remarks at the ECB Forum.
Across the pond, all eyes will be on the FOMC meeting and fresh ‘dots plot’ and economic projections. Market participants also expect the Fed to shed more light on the idea of potential rate cuts in the near to medium terms, while the impact of the ongoing trade dispute on the domestic economy should also be in centre stage.
What to look for around EUR
The renewed dovish stance from the ECB has now become the almost exclusive driver for the price action around the European currency, relegating to a secondary role the broad risk-appetite trends, USD-dynamics and trade tensions. Furthermore, the slowdown in the region looks unremitting and reinforces at the same time the current attitude of the central bank. On the political front, Italian politics is expected to remain a source of uncertainty and volatility for EUR, with the centre of the debate gyrating around the country’s opposition to EU fiscal rules as well as the challenging tone from LN’s M.Salvini.
EUR/USD levels to watch
At the moment, the pair is retreating 0.01% at 1.1192 facing immediate contention at 1.1181 (low Jun.18) seconded by 1.1176 (monthly low Mar.7) and finally 1.1115 (low May 30). On the upside, a breakout of 1.1347 (high Jun.7) would target 1.1354 (200-day SMA) en route to 1.1448 (monthly high Mar.20).
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