EUR/USD picks up pace and clinches daily highs near 1.1820

  • EUR/USD regains traction and advances to 1.1820.
  • The dollar loses some ground after US CPI missed expectations.
  • EMU’s Industrial Production, ECB-speak next in the calendar.

The single currency extends the choppy note so far this week and now lifts EUR/USD back to the 1.1820 region midweek.

EUR/USD focuses on data, risk trends

EUR/USD posts decent gains in the wake of the opening bell in the European markets on Wednesday, trading in the low-1.1800s and reversing Tuesday’s negative price action despite the move to weekly peaks near 1.1850.

The pair’s upside looks underpinned by the upbeat sentiment in the broad risk complex on the back of the offered note in the dollar as market participants continue to digest the recent disheartening US inflation figures during August.

In fact, investors continue to favour the riskier assets despite Chinese results from Industrial Production (+5.3% YoY) and Retail Sales (+2.5% YoY) came in short of estimates during August, all adding to the view of a probable slowdown in the economic recovery.

On the ECB front, ECB’s Board member P. Hernandez de Cos (Bank of Spain) defended the transitory nature of the current higher inflation, adding that the central bank stays ready to act in case of persistent upside pressure in inflation. More on inflation came from the German IFO, as it now sees consumer prices rising 3% this year and by around 2.0%-2.5% in 2022.

In the euro docket, France’s final CPI rose 0.6% MoM and 1.9% YoY during last month. In Italy, the CPI gained 0.4% MoM and 2.0% YoY during the same period. Later in the session, Industrial Production in the broader Euroland are due ahead of the speech by ECB’s I.Schnabel.

Across the pond, the calendar includes Mortgage Applications measured by MBA followed by Export/Import Prices, the NY Empire State Index, Industrial/Manufacturing Production and Capacity Utilization.

What to look for around EUR

EUR/USD faded the uptick to the 1.1850 region post-US CPI on Tuesday, although it manages well to keep the trade above the 1.1800 yardstick amidst the broad choppy performance. With the ECB’s dovish “recalibration” now in the rear-view mirror, investors now seem to have shifted the attention back to inflation fears and the progress of the Delta variant, which, coupled with the Fed’s taper speculations, are expected to cap the upside potential in spot for the time being.

Key events in the euro area this week: Industrial Production (Wednesday) – Balance of Trade (Thursday) – EMU Final August CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections in September could bring some political jitters to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is gaining 0.11% at 1.1815 and faces the next up barrier at 1.1909 (monthly high Sep.3) followed by 1.1932 (100-day SMA) and finally 1.2000 (psychological level). On the other hand, a break below 1.1770 (weekly low Sep.13) would target 1.1704 (monthly low Mar.31) en route to 1.1663 (2021 low Aug.20).

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