EUR/USD tumbles to session lows near 1.1170

EUR/USD is now accelerating the downside after breaking below the 1.1200 handle at the beginning of the week.

EUR/USD focused on US-China trade, Italy

Despite the knee-jerk, spot maintains the broad-based sideline theme in the familiar range so far on Monday, all against the backdrop of permanent cautiousness on developments from the US-China trade war.

Other than the trade front, EUR stays wary on headlines from the Italian political scenario, where speculations of snap elections remain on the rise and Lega Nord’s official said the party plans to raise the budget deficit to 2.8% of GDP in order to avoid a VAT increase.

It will be an interesting week data wise for the single currency, as the German ZEW survey is due tomorrow ahead of German/EMU advanced Q2 GDP figures and Industrial Production in the euro area, all due on Wednesday. Across the pond, all eyes will be on CPI results (Tuesday) and Retail Sales (Thursday).

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 losing 0.22% at 1.1172 and faces the next support at 1.1156 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1). On the flip side, a breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1293 (200-day SMA).