EUR/USD climbs to fresh tops around 1.1960 post-US PCE

  • EUR/USD pushes higher to daily peaks above 1.1960.
  • German GfK Business Climate improves in July.
  • US Core PCE rose 0.5% MoM, 3.4% YoY.

The selling pressure around the greenback currency now picks up pace and lifts EUR/USD to the area of daily highs around 1.1960/65 on Friday.

EUR/USD stronger post-US PCE

EUR/USD now trades in new 2-day highs in response to the drop in the dollar in the wake of disappointing PCE results.

Indeed, inflation fears receded pari passu with tapering speculation after US inflation gauged by the PCE rose 0.5% inter-month in May and 3.4% over the last twelve months, leaving no room for upside surprises and putting the buck under extra pressure.

The pair’s recovery is also supported by the persistent improvement in the risk-associated galaxy, with stocks and commodities also lending oxygen to the upbeat sentiment.

Additional US data saw Personal Income contracting at a monthly 2.0% during the same period and Personal Spending coming in flat from a month earlier.

In the domestic docket and earlier in the session the German Consumer Climate tracked by GfK improved to -0.3 for the month of July, while ECB’s M3 Money Supply expanded 8.4% on a year to May and Private Sector Loans expanded 3.9% from a year earlier. In addition, the European Council will carry on with its 2-day meeting.

What to look for around EUR

EUR/USD’s recovery lost momentum in the 1.1970/80 band for the time being. Price action around the pair is expected to exclusively follow the dollar dynamics, at least in the very near term and particularly after the latest FOMC event. In the meantime, support for the European currency comes in the form of auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity and the investors’ appetite for riskier assets.

Key events in the euro area this week: European Council meeting (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is gaining 0.28% at 1.1964 and faces the next resistance at 1.1994 (200-day SMA) followed by 1.2029 (100-day SMA) and finally 1.2064 (38.2% Fibo retracement of the November-January rally). On the other hand, a break below 1.1847 (monthly low Jun.18) would target 1.1835 (low Mar.9) and route to 1.1704 (2021 low Mar.31).

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