EUR/USD struggles for direction around 1.1840 ahead of ECB, Lagarde

The shared currency trades without clear direction and prompts EUR/USD to remain within a narrow range in the 1.1840/50 zone on Friday.

EUR/USD focuses on Lagarde, ECB

Sellers re-emerged following Thursday’s modest uptick to the 1.1870 region and sparked some downside mood amidst a mild rebound in the greenback and the persistence of the risk-off sentiment in the global markets.

Also limiting the upside potential in the pair, the ECB’ Strategy Review came up with no surprises and even with a dovish tilt after it showed the central bank now adopted a symmetric 2% inflation target and added it will include estimates of costs of owner-occupied housing in its measure of consumer prices.

Later in the session, Chairwoman Lagarde will once again be in the limelight as she will participate in a panel discussion on digitalisation. In addition, the ECB will publish its Accounts of the latest meeting.

What to look for around EUR

The recent strong pullback in EUR/USD appears to have met some decent contention around 1.1780 for the time being. 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, 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 0.08% at 1.1833 and a breakdown of 1.1781 (monthly low Jul.7) would target 1.1762 (78.6% Fibo of the November-January rally) and route to 1.1704 (2021 low Mar.31). On the upside, the next resistance is located at 1.1895 (weekly high Jul.6) followed by 1.1975 (weekly high Jun.25) and finally 1.2000 (200-day SMA).