EUR/USD challenges weekly lows in the 1.1350 area ahead of German CPI

The selling bias around the shared currency remains well and sound in the second half of the week and is now forcing EUR/USD to test the lower bound of the range in the mid-1.1300s.

EUR/USD near the 200-day/week SMA

Spot comes under further downside pressure early on Thursday and is challenging the critical contention zone in the  mid-1.1300s, where coincide the 200-day and 200-week SMAs.

Diminishing concerns on the US-China trade front and a potential Trump-Xi meeting at the G-20 event later in the week have all collaborated with the improved mood in the risk-associated complex in past hours.

Higher US yields are fuelling the outflows from the Japanese safe haven and are propping up the correction higher in USD/JPY, in turn lending extra wings to the buck.

Moving forward, several gauges of sentiment and confidence are due in Euroland, although the salient event will be the publication of advanced inflation figures in Germany for the month of June.

Across the pond, weekly Claims are due seconded by Pending Home Sales and the final revision of the GDP for the January-March period.

The continuation of the down move is following Tuesday’s bearish ‘outside day’ at the time when market participants appears to have relegated probable rate cuts by the Federal Reserve to the back-seat as the main catalyst for the price action, focusing instead on the tangible likeliness of ECB’s rate cuts and/or QE.

What to look for around EUR

The renewed dovish stance from the ECB and USD-dynamics should dictate the price action around the pair in the near term, helped at the same time by the broad risk-appetite trends and trade tensions. Further out, the slowdown in the region looks unremitting and reinforces at the same time the current dovish attitude of the central bank. On the political front, Italian politics is expected to remain a source of uncertainty and volatility for EUR, with the centre of the debate gyrating around the country’s opposition to EU fiscal rules as well as the challenging tone from LN’s M.Salvini.

EUR/USD levels to watch

At the moment, the pair is retreating 0.16% at 1.1350 and faces the next down barrier at 1.1344 (low Jun.25) followed by 1.1259 (100-day SMA) and finally 1.1181 (low Jun.18). On the flip side, a break above 1.1412 (high Jun.25) would target 1.1419 (high Feb.28) en route to 1.1448 (monthly high Mar.20).