EUR/USD regains some composure around 1.1600, looks to data

The downside pressure in the single currency appears somewhat mitigated as EUR/USD manages to retake the 1.1600 neighbourhood so far on Thursday.

EUR/USD looks to the dollar, risk trends

After four consecutive daily declines (and four weekly drops in a row so far), the sharp selloff in EUR/USD appears to have met some initial contention in the 1.1590 region for the time being.

Indeed, the rally in the greenback seems to have entered into an impasse considering the recent needle-like spike higher and the eventual overbought conditions in the US Dollar Index (DXY).

No news from ECB’s Lagarde at her debate with central bank peers at the Forum in Sintra on Wednesday after she expects the economy to return to pre-pandemic levels by year-end. She also reiterated that uncertainties still persist while she sees supply bottlenecks easing in H1 2022.

Earlier in the session, the German Unemployment Rate stayed put at 5.5% in September while the Unemployment Change shrank by 30K this month. Still in Germany, the preliminary inflation figures for the month of September are due later. Further data will see the jobless rate in the broader Euroland during August.

Across the Atlantic, final Q2 GDP readings are due seconded by usual weekly Claims, the Chicago PMI and speeches by FOMC’s Williams, Bostic and Harker.

What to look for around EUR

EUR/USD remains under heavy pressure despite Thursday’s mild bullish attempt, which might as well be a technical rebound following Wednesday’s sharp drop to the sub-1.1600 area and therefore entering the oversold territory. In the meantime, dollar dynamics, occasional bouts of risk aversion and higher yields continue to keep the pair under scrutiny for the time being. In the euro region, the likely loss of momentum in the economic recovery, as per some weakness seen in key fundamentals, continues to undermine the mood around the shared currency.

Key events in the euro area this week: German labour market report, German September flash inflation figures (Thursday) – German Retail Sales, final August PMIs, EMU preliminary inflation figures (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. 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 0.05% at 1.1603 and faces the next up barrier at 1.1755 (weekly high Sep.22) seconded by 1.1774 (55-day SMA) and finally 1.1845 (weekly high Sep.14). On the other hand, a break below 1.1589 (2021 low Sep.29) would target 1.1572 (200-week SMA) en route to 1.1495 (high Mar.9 2020).