EUR/USD clings to gains around 1.1200, attention remains on trade

  • EUR/USD keeps gyrating around the 1.1200 handle.
  • Yields of German 10-year Bund dropped to record lows.
  • Spanish Industrial Production, ECB’s Economic Bulletin next on tap.

EUR/USD is navigating within a consolidative mode around the 1.1200 area for the time being amidst the generalized drop in global yields.

EUR/USD looks to yields

After climbing to the 1.1250 region earlier in the week, the pair receded to  the 1.1200 neighbourhood where it is now looking to consolidate somehow amidst the absence of relevant catalysts  other than the US-China protracted trade dispute.

The globalized sentiment towards safer assets saw yields of the German 10-year Bund drop to record low levels below -0.60% yesterday, prompting the spread differential with its American peer to rebound from recent lows and retake the area of 230 pts.

Nothing relevant data wise in Euroland, as Spanish Industrial Production figures are out later today seconded by the ECB’s Economic Bulletin. Across the ocean, the weekly report on the US labour market will be the sole publication later in the NA session.

What to look for around EUR

The sideline mood in the single currency is extending so far this week, always following USD-dynamics and rising concerns on the trade front and its impact on global growth. However, rallies in the pair are expected to remain limited in the near/medium term in tandem with ECB’s preparations for a fresh wave of monetary stimulus (probably in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.

EUR/USD levels to watch

At the moment, the pair is gaining 0.11% at 1.1210 and breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1295 (200-day SMA). On the flip side, the next support emerges at 1.1149 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1).

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