EUR/USD trims gains on US data, near 1.1140


  • EUR/USD faded earlier gains and returned to the 1.1140/35 band.
  • The Greenback moves higher and tests 98.00 gauged by the DXY.
  • US Retail Sales expanded 0.7% MoM in July.

EUR/USD saw its upside quickly reversed and it has returned to the 1.1140/35 band in the wake of auspicious US data releases.

EUR/USD upside capped around 1.1160

The shared currency has quickly given away earlier gains vs. the buck to the 1.1160 region in response to the better-than-expected results from today’s US calendar.

In fact, US headline Retail Sales surprised to the upside in July, expanding at a monthly 0.7%. Core sales too came in above estimates, up 1.0% inter-month. Additionally, the always key Philly Fed manufacturing index came in at 16.8 for the current month, surpassing forecasts albeit below July’s reading, and the NY Empire State index moved higher to 4.80 in the same period, bettering both consensus and previous print. Furthermore, Initial Claims rose at a weekly 220K, taking the 4-Week Average to 213.75K from 212.75K.

Positive results in the US docket also motivated US 10-year yields to rebound, lending extra support to the buck via a stronger USD/JPY.

Later in the session, further US publications will see Industrial Production figures, Manufacturing Production, Business Inventories, the NAHB index and TIC Flows.

What to look for around EUR

The reluctance of EUR to edge lower in the current risk-off environment could be reflected in ‘repatriation’ forces currently at play as well as the potential funding stance of the currency. Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later. Sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. In the meantime, the unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen capping extra gains and are also lending extra support to the dovish stance of the ECB.

EUR/USD levels to watch

At the moment, the pair is up 0.05% at 1.1144 and a breakout of 1.1165 (21-day SMA) would target 1.1232 (55-day SMA) en route to 1.1282 (high Jul.19). On the flip side, immediate contention emerges at 1.1130 (low Aug.15) seconded by 1.1101 (monthly low Jul.25) and finally 1.1026 (2019 low Aug.1).

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