EUR/USD alternates gains with losses near 1.1120

The shared currency remains under the microscope at the beginning of the week, while EUR/USD is so far navigating the 1.1120 region amidst the continuation of the bid tone in the buck.

EUR/USD looks to data, FOMC

The pair has started the week on a mixed tone, although it manages well to keep business above recent lows in the 1.1100 neighbourhood despite the persistent buying interest surrounding the greenback.

The recent dovish message at the ECB event has opened the door to the probable announcement of a package of accommodative measures at the September meeting, and is expected to keep the single currency under the microscope for the foreseeable future.

The down move in the pair has been accompanied by the drop in German yields to fresh all-time lows, widening the gap vs. their US peers to fresh tops around the 246 pts.

In the meantime, recent positive readings from US Q2 GDP plus the upcoming trade talks in Shanghai on Tuesday and Wednesday are seen supporting the risk appetite trends in the short-term horizon.

In the data space, Spanish advanced inflation figures for the month of July are due later today, while the FOMC meeting (Wednesday) and July’s Non-farm Payrolls (Friday) will be the salient events later this week.

What to look for around EUR

The single currency is expected to remain under scrutiny in the next weeks amidst ECB’s preparations for a fresh wave of monetary stimulus, including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.

EUR/USD levels to watch

At the moment, the pair is losing 0.01% at 1.1123 and faces immediate contention at 1.1101 (2019 low Jul.25) seconded by 1.1021 (high May 8 2017) and finally 1.0839 (monthly low May 11 2017). On the upside, a break above 1.1234 (55-day SMA) would target 1.1286 (high Jul.11) en route to 1.1305 (200-day SMA).