EUR/USD regains the smile and targets 1.1800

The single currency meets some dip buyers and pushes EUR/USD to the 1.1780 region at the end of the week.

EUR/USD re-focuses on 1.1800

EUR/USD manages to regain some composure and returns to the positive territory aided by the mild selling pressure surrounding the dollar.

Actually, the consolidative mood in the US bonds market plus some profit taking sentiment around the greenback sustains the current decline in the US Dollar Index (DXY) and gives legs to the recovery in spot.

In spite of the ongoing pick-up in the pair, the outlook for the single currency remains clouded by investors’ preference for the dollar amidst renewed optimism on the economic recovery (as per recent results in some fundamentals) and rising bets for the Fed’s QE tapering at some point later in the year. On the latter, it remains to be seen whether recent stronger-than-expected Retail Sales could prompt some (surprising?) changes in the Fed’s message at the meeting next week.

Later in the euro calendar, July’s Current Account results in the broader Euroland are due followed by final inflation figures in the bloc for the month of August.

Across the pond, September’s flash U-Mich Index will be the sole release.

What to look for around EUR

EUR/USD succumbed to the USD-led selling pressure and recorded multi-week lows in the mid-1.1700s on Thursday. 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 keep spot under scrutiny for the time being.

Key events in the euro area this week: 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 0.09% at 1.1775 and faces the next up barrier at 1.1845 (weekly high Sep.14) followed by 1.1909 (monthly high Sep.3) and finally 1.1926 (100-day SMA). On the other hand, a break below 1.1750 (monthly low Sep.16) would target 1.1704 (monthly low Mar.31) en route to 1.1663 (2021 low Aug.20).