EUR/USD challenges 1.1200 on ECB, Italy

After climbing to fresh tops in the vicinity of 1.1250, EUR/USD has now given away those gains and refocus its trade to the 1.1200 neighbourhood.

EUR/USD weaker on ECB

The European currency has quickly lost upside momentum after news cited the probability that the ECB could revamp its inflation target. Also hurting the sentiment in EUR, 5-S Movement’s L.Di Maio hinted at the likeliness that the Lega wants to topple the government.

Spot rapidly left the area of session tops in the mid-1.1200s, coincident with the key 100-day SMA, and is now trading at shouting distance from weekly lows around the 1.1200 area.

Renewed selling interest has been hurting the buck in past hours on the back of poor results from the US housing sector and fresh US-China trade jitters, lending extra support to the riskier assets and at the same time helping spot to rebound from as low as the 1.1200 handle.

What to look for around EUR

The inability of the pair to clear the important resistance area in 1.1280/90 has encouraged sellers to return to the markets, triggering the recent test of the 1.1200 neighbourhood, where some support appears to have resurfaced. Further out, occasional bullish attempts should be seen as a short-lived against the backdrop of renewed and increasing speculations of another wave of monetary stimulus from the European Central Bank in the near term, via interest rate cuts (July/September), the resumption of the QE programme and changes in the forward guidance. Also weighing on the currency, the dovish stance from the ECB appears reinforced by the recent appointment of ex-IMF’s C.Lagarde to succeed M.Draghi. On the macro scenario, the slowdown in the region looks unremitting and it also reinforces the current accommodative attitude of the central bank.

 EUR/USD levels to watch

At the moment, the pair is losing 0.11% at 1.1211 and faces the next support at 1.1193 (monthly low Jul.9) followed by 1.1181 (low Jun.18) and finally 1.1106 (2019 low May 23). On the flip side, a breakout of 1.1286 (high Jul.11) would target 1.1319 (200-day SMA) en route to 1.1412 (high Jun.25).