EUR/USD trims losses and returns near 1.09, focus on ISM

After bottoming out in the 1.0880/75 band earlier in the session, EUR/USD managed to regain some poise and is now flirting with the key barrier at 1.09 the figure.

EUR/USD now looks to data

The pair came under extra selling pressure in the first half of the week following poor results from the German flash CPI on Monday, while today’s flash inflation figures in the broader euro area showed the same lack of upside traction.

EUR’s reaction, however, was muted as market participants have practically anticipated the results, particularly in the wake of German data.

In the meantime, the sharp rebound in yields of the German 10-year reference appears to have lent some support to the single currency via shrinking spread differentials vs. their American peer, all ahead of the key US ISM manufacturing expected later in the NA session.

What to look for around EUR

EUR dropped to new 2-year lows vs. the Greenback in the 1.0880/75 band earlier in the session, as investors’ sentiment remains sour and without any hint of getting any better, at least in the near/medium term. In fact, the slowdown in the euro area stays far from abated and carries the potential to deteriorate further, as per the latest PMIs in core Euroland and despite the lacklustre improvement in a couple of German sentiment gauges. Speaking of Germany, the likeliness that the country could slip back into recession in the third quarter just adds to the already gloomy panorama for the bloc and weighs further on the single currency. The unremitting slowdown in the region does nothing but justify the ‘looser for longer’ monetary stance by the ECB. On another front, potential US tariffs on imports of EU cars remain well on the table, while the Brexit limbo and UK politics adds to the ongoing concerns.

EUR/USD levels to watch

At the moment, the pair is gaining 0.02% at 1.0899 and faces the next hurdle at 1.0925 (low Sep.3) seconded by 1.1003 (21-day SMA) and finally 1.1109 (monthly high Sep.13). On the flip side, a breakdown of 1.0879 (2019 low Oct.1) would target 1.0839 (monthly low May 11 2017) en route to 1.0569 (monthly low Apr.10 2017).