- EUR/USD reverses the recent weakness and revisits the 1.1640 zone.
- The greenback claws back some ground lost and bounces off lows.
- Italian Industrial Sales expanded 0.8% MoM in August and 13.8% YoY.
The single currency now faces some selling pressure and forces EUR/USD to recede to the 1.1640 region on Thursday.
EUR/USD offered on USD recovery
After three consecutive daily advances, EUR/USD now gives away part of those gains after faltering once again in the area of recent peaks near 1.1670.
The modest recovery in the greenback prompts the pair and the rest of the risk complex to shed some ground in light of the recent strong advance.
Indeed, the better sentiment surrounding the riskier assets coupled with speculations that many G10 central banks could be mulling the idea of a sooner-than-anticipated return to the normalization of the monetary policy weighed on the buck in past sessions and sponsored quite a strong leg lower in the US Dollar Index.
In the data space, Industrial Sales in Italy expanded at a monthly 0.8% during August and 13.8% from a year earlier. In France, the Business Confidence stayed unchanged at 107 for the current month.
Across the pond, the usual weekly Claims are due seconded by the Philly Fed Index, housing data, the CB Leading Index and the speech by FOMC’s C.Waller.
What to look for around EUR
EUR/USD advanced further and clinched fresh October peaks near 1.1670 earlier in the week. While the improvement in the sentiment surrounding the risk complex lent extra wings to the par, price action is expected to keep looking to dollar dynamics for the time being, where tapering chatter remains well in centre stage. In the meantime, the idea that elevated inflation could last longer coupled with the loss of momentum in the economic recovery in the region, as per some weakness observed in key fundamentals, are seen pouring cold water over investors’ optimism as well as bullish attempts in the European currency.
Key events in the euro area this week: Preliminary PMIs in the euro zone (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Probable political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the euro. ECB tapering speculations.
EUR/USD levels to watch
So far, spot is losing 0.08% at 1.1638 and faces the next up barrier at 1.1669 (monthly high Oct.19) followed by 1.1711 (55-day SMA) and finally 1.1755 (weekly high Sep.22). On the other hand, a break below 1.1607 (20-day SMA) would target 1.1571 (low Oct.18) en route to 1.1524 (2021 low Oct.12).
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