EUR/USD gathers some traction and tests 1.1150


  • EUR/USD moves higher and visits the mid-1.1100s.
  • The Greenback looks volatile around the 98.00 handle.
  • US Retail Sales, Philly Fed index next of relevance.

The single currency is regaining some poise in the second half of the week and is lifting EUR/USD to daily highs near 1.1150.

EUR/USD focused on yields, trade, data

Spot is showing some upside momentum after two consecutive daily pullbacks, managing to rebound from weekly lows in the 1.1130 region.

EUR remains under pressure in light of the recent pick up in the demand for the buck amidst alleviated concerns on the US-China trade front, all in response to the recently announced delay in US tariffs on Chinese products and some positive speculations over the upcoming meeting between both parties at some point in September.

In addition, the European currency is suffering the decline in yields of the key German 10-year Bund to all time lows around -0.66%, all against the backdrop of the globalized ‘flight-to-safety’ mode.

Nothing expected in the European docket today, whereas all the attention will be across the pond with the releases of key Retail Sales, the Philly Fed index and the NY Empire State index, among other publications.

What to look for around EUR

The reluctance of EUR to edge lower in the current risk-off environment could be reflected in ‘repatriation’ forces currently at play as well as the potential funding stance of the currency. Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later. 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. In the meantime, the unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen capping extra gains and are also lending extra support to the dovish stance of the ECB.

EUR/USD levels to watch

At the moment, the pair is up 0.03% at 1.1141 and a breakout of 1.1165 (21-day SMA) would target 1.1232 (55-day SMA) en route to 1.1282 (high Jul.19). On the flip side, immediate contention emerges at 1.1130 (low Aug.15) seconded by 1.1101 (monthly low Jul.25) and finally 1.1026 (2019 low Aug.1).

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