EUR/USD attempts a recovery above 1.1000 ahead of ECB

After bottoming out in the 1.0980 region on Wednesday, EUR/USD is now attempting to extend the corrective rebound beyond the 1.10 handle.

EUR/USD focused on ECB, US CPI

The pair is alternating gains with losses early in the Old Continent, shrugging off so far Wednesday’s negative price action and the test of new multi-day lows in the proximity of 1.0980.

In fact, the improved mood stemming from the US-China trade front lifted US and European yields and sponsored the selling bias in the safe havens, adding extra legs to the buck and widening the US-German yield spread differential.

Later in the session, the shared currency should remain under the microscope as the ECB is expected to announce extra easing measures, including the likeliness of a deposit rate cut, a tiered interest rate scheme and even the possibility of restarting the ‘quantitative easing’ programme (QE).

Previously, final German inflation figures showed the CPI contracted 0.2% inter-month in August and rose 1.4% from a year earlier, matching the preliminary readings. Later, Industrial Production results will be the sole release in the euro bloc ahead of the ECB event.

What to look for around EUR

The pair is expected to remain sidelined at current levels, as markets get closer to the ECB gathering later today. The recent up move to the upper 1.10s is still seen as corrective only, as results from the domestic docket keep the pressure intact on the single currency and support the need for ECB stimulus. This view is also expected to keep occasional bullish attempts well contained for the time being. On the political front, Italian effervescence looks dissipated for the time being, while uncertainty over UK politics and Brexit could add to the current inconclusive price action.

EUR/USD levels to watch

At the moment, the pair is gaining 0.02% at 1.1013 and faces the next barrier at 1.1053 (21-day SMA) seconded by 1.1084 (high Sep.5) and finally 1.1146 (55-day SMA). On the flip side, a breach of 1.0985 (low Sep.11) would target 1.0925 (2019 low Sep.3) en route to 1.0839 (monthly low May 11 2017).