EUR/USD challenges session lows near 1.1070 ahead of PMIs

The bearish mood around the shared currency is everything but abated in the second half of the week, with EUR/USD now probing the area of session lows near 1.1070.

EUR/USD focused on data, weaker post-FOMC

The pair is trading within the negative territory for the second session in a row today following the persistent and gradual up move in the buck.

In fact, yesterday’s FOMC minutes of the August event lent extra legs to the Greenback after the Committee unveiled a strong bias among members to keep rates unchanged or adjust them by a small hike (which was what eventually happened). In addition, members continue to see a healthy economy and a robust labour market despite rising uncertainty on the outlook.

Closer to home, Italian politics should continue to limit occasional and serious bullish attempts in combination with increasing expectations of extra ECB easing at next month’s gathering.

Later in the European morning, Markit will publish its advanced PMIs in core Euroland for the month of August. Across the pond, the usual weekly report on the labour market is due along with flash PMIs and the start of the Jackson Hole Symposium.

What to look for around EUR

EUR has finally succumbed to the downside pressure although another test of YTD lows in the proximity of 1.1020 remains elusive for the time being. Renewed buying interest surrounding the buck, expectations of ECB easing and Italian politics are seen driving the mood around the shared currency at the moment. That said, sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. This scenario has been confirmed as of late following poor results from the euro-docket, adding to the unremitting deterioration of the economic outlook in the region.

EUR/USD levels to watch

At the moment, the pair is losing 0.05% at 1.1078 and faces immediate contention at 1.1065 (low Aug.20) seconded by 1.1026 (2019 low Aug.1) and finally 1.0839 (monthly low May 11 2017). On the other hand, a breakout of 1.1136 (21-day SMA) would target 1.1218 (55-day SMA) en route to 1.1282 (high Jul.19).