EUR/USD remains under pressure in the low-1.1800s ahead of FOMC

The single currency keeps the offered note unchanged at prompts EUR/USD to navigate the lower end of the weekly range near 1.1820 on Wednesday.

EUR/USD weaker on USD-buying

EUR/USD loses ground for the third session in a row and remains well poised to challenge the key support in the 1.1800 neighbourhood, as investors’ preference for the dollar appears firm.

Indeed, the recent pick-up in volatility (as measured by the VIX index) and the surge in covid cases of the Delta variant in many countries have underpinned the resurgence of the risk aversion among market participants, hence revitalizing the sentiment for the buck.

Earlier in the euro docket, the German Industrial Production added to the April’s pullback and contracted 0.3% MoM in May. These results came in line with Tuesday’s loss of momentum in the Economic Sentiment in both Germany and the broader Euroland.

In the US data space, the FOMC Minutes should gather all the attention seconded by MBA’s Mortgage Applications, JOLT Job Openings and the API’s report on crude oil supplies.

What to look for around EUR

Following the failed attempt to retake the 1.1900 area on Tuesday, sellers have returned to EUR/USD and opened a door to a probable re-test of recent lows near 1.18 the figure. Price action around spot, in the meantime, is expected to exclusively follow dollar dynamics, particularly after the latest FOMC gathering underpinned prospects of higher inflation and potential tapering before anticipated. Further out, support for the European currency comes in the form of auspicious results from fundamentals in the bloc coupled with higher morale, a strong rebound in the economic activity and the investors’ appetite for riskier assets.

Key events in the euro area this week: ECB Accounts (Thursday) – ECB’s Lagarde (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is losing 0.02% at 1.1820 and a break below 1.1807 (monthly low Jul.2) would target 1.1762 (78.6% Fibo of the November-January rally) and route to 1.1704 (2021 low Mar.31). On the flip side, the next up barrier lines up at 1.1895 (weekly high Jul.6) followed by 1.1975 (weekly high Jun.25) and finally 1.1999 (200-day SMA).