EUR/USD stays flat near 1.1800 as focus shifts to German GDP and IFO data
|- EUR/USD rose to 1.1850 but erased its gains during American session.
- US Dollar Index stays above 93.20, reflecting broad USD strength.
- Germany will release second-quarter GDP report and IFO sentiment data on Tuesday.
The EUR/USD pair posted weekly losses for the first time since mid-June last week but staged a rebound during the first half of the day on Monday. However, the pair met resistance near 1.1850 and erased its daily gains. As of writing, EUR/USD was virtually unchanged on the day at 1.1798.
A recovery witnessed in the US Treasury bond yields during the American trading hours helped the greenback gather strength in the absence of any significant macroeconomic data releases. The US Dollar Index, which fell to a daily low of 92.84, was last seen posting modest daily gains at 93.28.
On Tuesday, second-quarter Gross Domestic Product (GDP) report, IFO Business Climate and Current Assessment data from Germany will be watched closely by the market participants. The advanced estimate showed that the German economy contracted by 11.7% on a yearly basis and markets expect the final reading to remain unchanged. However, if the IFO data show a further deterioration in business sentiment, the shared currency could continue to weaken against the USD.
EUR/USD near-term outlook
In a recently published report, analysts at MUFG Bank noted that EUR/USD could extend its correction if it fails to reclaim 1.1200.
“A break below support 1.1700 would open the door to a deeper correction lower. We have highlighted renewed FX instability in Turkey and the increasing spread of COVID in Europe as two potential triggers for a correction, both of which remain in play," analysts explained. "The upcoming Jackson Hole symposium could prove a key test in the week ahead. If EUR/USD is unable to break above 1.2000 after a dovish Fed policy signal, it would strongly suggest a lot of the bad news is already priced into the USD.”
Key levels to watch for
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