EUR/USD appears consolidative in the mid-1.1600s ahead of Powell

EUR/USD keeps navigating the area of multi-week lows near 1.1650 while market participants get ready for another testimony by Fed’s Jerome Powell.

EUR/USD offered on risk-off sentiment

The downtrend in EUR/USD gathered extra pace in response to the recent breakdown of the key contention area in the 1.1700 neighbourhood. The move appears to have opened the door to a deeper leg lower, although sellers appear contained around the 1.1630 level for the time being.

The firmer note in the buck in past sessions seems reinforced by the slower pace of the recovery in the US economy in light of the unabated pandemic. In addition, the idea of further stimulus loses ground by the day amidst rising political uncertainty ahead of the November elections.

Earlier in the session, the Business Climate in Germany measured by the IFO survey improved to 93.4 for the current month. Despite the uptick came in short of expectations, it well shows that the morale in the first economy of the bloc looks firmer along with the ongoing strong economic rebound.

In the US docket, Initial Claims rose more than forecasted during last week, adding to the notion that the US labour market could be struggling to gather extra momentum. Later in the NA session, August’s New Home Sales are due along with the third testimony by Fed’s Jerome Powell, this time before the House Select Committee.

What to look for around EUR

EUR/USD recorded fresh 2-month lows near 1.1640 on Thursday. Despite the move, the pair’s outlook still remains constructive and bearish moves are deemed as corrective only. Further out, the positive bias in the euro remains underpinned by auspicious results from domestic fundamentals (which have been in turn supporting further the view of a strong economic recovery after the slump in the activity during the spring), the so far calm US-China trade front and the steady – albeit vigilant- stance from the ECB. The solid position of the EMU’s current account coupled with the favourable positioning of the speculative community also lends support to the shared currency.

EUR/USD levels to watch

At the moment, the pair is retreating 0.19% at 1.1637 and faces immediate support at 1.1626 (monthly low Sep.24) seconded by 1.1495 (monthly high Mar.9) and finally 1.1447 (50% Fibo of the 2017-2018 rally). On the other hand, a break above 1.1709 (38.2% Fibo retracement of the 2017-2018 rally) would target 1.1742 (55-day SMA) en route to 1.1917 (high Sep.10).