EUR/USD stays calm around mid-1.19s, headed for a negative weekly close

The EUR/USD pair lost traction before reaching the 1.20 mark on Friday and gave back most of its daily gains during the second haşf of the NA session. As of writing, the pair was trading at 1.1945, still up 0.2% on the day.

Despite this latest retreat, the pair is looking to close the second day in a row higher. After testing the trend line coming from April at 1.1840, EUR/USD was able to record some meaningful recovery gains. Nevertheless, on a weekly basis, the pair is down a little more than 50 pips. However, the fact that the 5-month old uptrend is still intact suggests that this week's fall was nothing more than a technical correction.

On the other hand, the greenback's recovery this week failed to convince investors that it was making a strong comeback as the US Dollar Index failed to hold above the 92 mark. Today's data from the U.S. suggested that Hurricane Harvey, which hit Texas in August, was already weighing on the economic activity. The Federal Reserve Bank of New York revised its forecast for the Q3 GDP growth down to 1.3% from 2.1% this week, saying, "the decrease was driven by a large negative surprise from industrial production, and to a lesser extent by a negative surprise from retail sales," and further noting, "part of the decline in manufacturing is related to hurricane Harvey."

On Monday, the economic calendar will feature the consumer inflation data from the euro area, which could be the next catalyst for the pair. Markets expect the CPI to rebound to 0.3% in August from -0.5% in July. A robust growth in consumer prices could help the pair make another attempt to break above the 1.20 handle. On the other hand, a softer-than-expected reading could put the shared currency under pressure against its peers as it would cast doubt over the possibility of a tightening move by the ECB.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "the pair has an immediate resistance around 1.2030, followed by January 2015 high at 1.2101. Steady gains above the level should see the pair accelerating north, with dollar bulls probably giving up. The 1.2220/40 area comes next, en route to the 1.2330 price zone, where the pair had multiple monthly highs and lows from the past decade. Supports on the other hand, are located at 1.1870, and 1.1820, with a break below this last exposing the 1.1700/30 region."

Today's data from the U.S.:

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