- EUR/USD loses further ground and re-visits 1.1770.
- The dollar keeps the buying bias unchanged despite lower yields.
- Markets’ consensus around the ECB remains on the dovish side.
The selling pressure around the European currency remains unabated for yet another session and now forces EUR/USD to shed further ground and record new 3-month lows in the 1.1765/60 band.
EUR/USD in multi-month lows
EUR/USD is down for the third session in a row, navigating new 3-month lows and putting the key 2020-2021 support line to the test.
The continuation of the downtrend in spot comes amidst further strength in the buck and the broad-based sentiment favouring the risk aversion, all in spite of the persistent downside pressure in US yields.
In addition, the quick spread of the Delta variant of the coronavirus across the world continues to weigh on the global growth prospects and underpins at the same time the risk-off mood.
Nothing scheduled in the euro docket, while the Bundesbank is expected to publish its monthly report.
Across the pond, the NAHB Index will be the sole release in the US calendar.
What to look for around EUR
The resumption of the downside in EUR/USD now flirts with the key 2020-2021 support line in the 1.1770/80 band. As usual in past weeks, price action around the pair is expected to exclusively hinge on dollar dynamics, particularly as investors continue to adjust to the Fed’s hawkish message, prospects of higher inflation in the US and potential QE tapering earlier than anticipated. On the euro side of the equation, recent results from key fundamentals hinted at the idea that the recovery could have stalled or lost some momentum, casting some doubts over the growth prospects into the second half of the year. In addition, the dovish stance from the ECB could well be re-affirmed or even intensified at the next event later in the week, which carries the potential to keep the euro well under pressure.
Key events in the euro area this week: ECB meeting, EMU Flash Consumer Confidence (Thursday) – EMU advanced PMIs (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities in the wake of the pandemic.
EUR/USD levels to watch
So far, spot is losing 0.28% at 1.1768 and a breakdown of 1.1762 (78.6% Fibo of the November-January rally) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low). On the other hand, the next hurdle is located at 1.1895 (weekly high Jul.6) followed by 1.1975 (weekly high Jun.25) and finally 1.2002 (200-day SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.