EUR/USD turns positive near 1.1780, looks to data

EUR/USD alternates gains with losses around 1.1780 and manages to leave behind the pessimism seen at the beginning of the week.

EUR/USD focuses on data, risk trends

EUR/USD manages to rebound from earlier peaks around 1.1760 on the back of the now softer note surrounding the dollar and a mild recovery in the risk-associated galaxy.

However, market participants remain wary of the progress of the pandemic - particularly the advance of the delta variant - vs. the vaccination campaign and the growth prospects, which carry the potential to undermine any serious attempt of recovery in the pair, at least in the short-term horizon.

Later in the session, EMU’s advanced Q2 GDP figures, Construction Output in the euro area as well as employment data are due.

In the US docket, July’s Retail Sales are due seconded by Industrial and Manufacturing Production, Business Inventories, the NAHB Index and the API’s weekly report on US crude oil inventories. Fed’s J.Powell will also participate in a Q&A session.

What to look for around EUR

EUR/USD regained upside traction after re-visiting the area of YTD lows in the 1.1700 neighbourhood during last week and now flirts with the key 2020-2021 line near the 1.1800 zone. The monthly leg lower in the pair comes after another failed attempt to break above the tough resistance band at 1.1880/90 and follows the quite solid prospect for the dollar, always backed mainly on tapering speculation. On the euro side of the equation, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep the upside limited in spot despite auspicious results from key fundamentals and the persistent high morale in the region.

Key events in the euro area this week: Flash Q2 EMU GDP (Tuesday) – Final EMU CPI (Wednesday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections in September could bring some political effervescence to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency.

EUR/USD levels to watch

So far, spot is gaining 0.03% at 1.1779 and faces the next hurdle at 1.1866 (50-day SMA) seconded by 1.1908 (monthly high Jul.30) and finally 1.1975 (weekly high Jun.25). On the other hand, a breakdown of 1.1705 (monthly low Aug.11) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low).