- EUR/USD extends the downside to the 1.1840 region.
- The dollar gains traction and clinches new highs.
- Final EMU, German Manufacturing PMI came in above expectations.
The selling bias remains unchanged around the single currency and now drags EUR/USD to fresh 3-month lows in the 1.1840/35 band on Thursday.
EUR/USD stays under pressure, looks to US data
EUR/USD loses ground for yet another session and extends the weekly leg lower to new lows on the back of the perseverant buying pressure in the greenback.
In fact, and despite flat US 10-year yields, investors keep favouring the dollar in a context now dominated by the rapid pick-up of positive cases of the Delta variant of the covid, some risk-off mood and prospects of higher inflation in the months to come.
Data wise in Euroland, the final manufacturing PMI in both Germany and the broader euro area surpassed the preliminary readings at 65.1 and 63.4, respectively, although they did not help in the negative mood around the euro. Later in the session, Chairwoman Lagarde is due to speak.
Across the pond, the June’s ISM Manufacturing and the usual Initial Claims should grab all the attention among market participants ahead of Friday’s Nonfarm Payrolls.
What to look for around EUR
Sellers remain well in control of the sentiment surrounding EUR/USD for the time being, as price action in spot is expected to exclusively follow dollar dynamics, particularly following the latest FOMC gathering, prospects of higher inflation and potential tapering before anticipated. Further out, support for the European currency comes in the form of auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity and the investors’ appetite for riskier assets.
Key events in the euro area this week: German Retail Sales, Final Manufacturing PMIs in the euro area, EMU Unemployment Rate, ECB’s Lagarde (Thursday).
Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities.
EUR/USD levels to watch
So far, spot is losing 0.11% at 1.1842 and a break below 1.1837 (weekly low Jul.1) would target 1.1835 (low Mar.9) and route to 1.1704 (2021 low Mar.31). On the other hand, the next resistance emerges at 1.1976 (50% Fibo of the November-January rally) followed by 1.1995 (200-day SMA) and finally 1.2000 (psychological level).
