- EUR/USD alternates gains with losses below 1.1800.
- The ECB’s PEPP, forward guidance takes centre stage later.
- US Initial Claims will be in the limelight later in the NA session.
The single currency trades in a volatile fashion on ECB-day and motivates EUR/USD to gyrate around the 1.1780 region so far on Thursday.
EUR/USD focused on the ECB
EUR/USD struggles for direction following Wednesday’s decent advance, although a convincing break above 1.18 the figure still remains elusive for EUR-bulls.
Indeed, spot managed to regain some composure after bottoming out in fresh multi-month lows in the mid-1.1700s on Wednesday, always on the back of the resumption of the demand for riskier assets.
Later in the session, the ECB is expected to leave rates unchanged at its meeting, although the gathering has been growing in importance as of late after officials hinted at the possibility of a revision to the bank’s forward guidance and the current PEPP.
Data wise in the bloc, France’s Business Confidence improved to 110 in July (from 108). Other than the ECB gathering, the European Commission will release its preliminary gauge of the Consumer Confidence in the region for the current month.
In the US calendar, Initial Claims are due followed by the Chicago Fed Index, Existing Home Sales and the CB’s Leading Index for the month of June.
What to look for around EUR
EUR/USD managed well to leave behind recent lows near 1.1750, although the outlook remains fragile. As usual in past weeks, price action around the pair is expected to exclusively hinge on dollar dynamics, particularly as investors continue to adjust to the Fed’s hawkish message, prospects of higher inflation in the US and potential QE tapering earlier than anticipated. On the euro side of the equation, recent results from key fundamentals hinted at the idea that the recovery could have stalled or lost some momentum, casting some doubts over the growth prospects into the second half of the year. In addition, the dovish stance from the ECB could well be re-affirmed or even intensified later, which carries the potential to keep the euro well under pressure for the time being.
Key events in the euro area this week: ECB meeting, EMU Flash Consumer Confidence (Thursday) – EMU advanced PMIs (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. Investors’ shift to European equities in the wake of the pandemic.
EUR/USD levels to watch
So far, spot is gaining 0.04% at 1.1795 and faces the next up barrier at 1.1895 (weekly high Jul.6) followed by 1.1975 (weekly high Jun.25) and finally 1.2002 (200-day SMA). On the flip side, a breakdown of 1.1751 (monthly low Jul.21) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low).
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