EUR/USD tumbles further and tests 1.1100, session lows

The now better tone in the dollar is forcing EUR/USD to recede to the area of weekly lows in the 1.1100 neighbourhood.

EUR/USD weaker despite poor US data

The pair has now retreated to weekly lows and threatens to breach the key support at 1.1100 the figure on the back of the increasing buying interest surrounding the buck, while the risk-on environment appears unaltered for the time being.

In fact, the US Dollar Index (DXY) is flirting with yearly tops above 97.50 despite US inflation figures came in short of expectations during December: headline prices tracked by the CPI rose at a monthly 0.2% and 2.3% from a year earlier, while consumer prices excluding energy and food costs rose 0.1% inter-month and 2.3% over the last twelve months.

There are no more data releases on the docket, while speeches by FOMC’s Williams and George should keep the attention on the dollar later in the NA session.

What to look for around EUR

Spot has managed well to keep the recovery from lows in the 1.1085/80 band well and sound so far, retaking the 1.1100 handle and now challenging the key barrier at the 20-day SMA near 1.1140. In the meantime, markets’ focus has now returned to the US-China’s ‘Phase One’ deal, likely to be signed in the next hours. On the more macro view, the slowdown in the region remains far from abated and continues to justify the ‘looser for longer’ monetary stance from the ECB. On the latter, we should have a more detailed assessment of the latest ECB meeting on Thursday with the publication of the bank’s Accounts.

EUR/USD levels to watch

At the moment, the pair is losing 0.25% at 1.1106 and a breach of 1.1094 (55-day SMA) would target 1.1085 (2020 low Jan.10) en route to 1.1064 (low Dec.20 2019). On the upside, the next up barrier emerges at 1.1147 (high Jan.13) seconded by 1.1186 (61.8% of the 2017-2018 rally) and finally 1.1199 (high Dec.13 2019).