EUR/USD around 1.1100 ahead of German IFO, ECB

The sentiment around the European currency has been deteriorating throughout this week, particularly after EUR/USD clinched 2-month peaks near 1.1180 on Monday.

EUR/USD weaker on USD recovery, ECB

The pair is struggling for direction near the 1.1100 handle ahead of the opening bell in Euroland on Friday.

The renewed selling bias in spot has been confirmed yesterday after it charted a bearish ‘outside day’ and briefly piercing the key support at 1.1100 the figure on the back of the dovish tone from the ECB and increasing buying interest surrounding the buck.

In fact, and as largely anticipated, the ECB left the monetary conditions unchanged at its gathering on Thursday. At his last meeting as President, Draghi reiterated the risks to the economic outlook and inflation remain tilted to the downside amidst the protracted slowdown in the region.

On the USD-side, the absence of news on the US-China trade front in combination with renewed concerns on the Brexit negotiation have been lending legs to the recovery in the Greenback and thus weighing on spot.

Moving forward, the German IFO survey is next of significance on the docket along with the ECB’s Survey of Professional Forecasters (SPF). Across the pond, all the attention will be on the final print of the U-Mich index.

What to look for around EUR

The upside momentum in the pair has extended to the 1.1180 region on Monday, where it met some strong resistance and sparked a correction lower to the 1.1100 neighbourhood post-ECB meeting. Despite the recent rally in spot has been exclusively sponsored by weakness in the Dollar, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.

EUR/USD levels to watch

At the moment, the pair is gaining 0.03% at 1.1106 and faces the next up barrier at 1.1171 (monthly high Oct.18) seconded by 1.1186 (61.8% Fibo of the 2017-2018 rally) and finally 1.1202 (200-day SMA). On the other hand, a breach of 1.1093 (low Oct.24) would target 1.1044 (55-day SMA) en route to 1.0925 (low Sep.3).