- EUR/USD extends the upbeat momentum to the 1.1850 zone.
- EMU Producer Prices come up next in the domestic docket.
- Initial Claims, Balance of Trade, Factory Order next of note later.
The upside bias around the European currency remains well and sound for yet another session and now encourages EUR/USD to attempt another surpass of 1.1850 on Thursday.
EUR/USD bid ahead of data
EUR/USD advances for the fifth consecutive session so far, posting gains in 9 of the last 10 trading days and returning to levels last seen about a month ago well past 1.18 the figure.
The strong rebound in the pair from new 2021 lows near 1.1660 recorded in mid-August has been sustained by the increasing offered bias in the dollar, in turn exacerbated after Powell’s comments at the Jackson Hole event last Friday.
Also collaborating with the improvement in the sentiment around the single currency appears recent hawkish comments from ECB’s Holzmann, Knot, Lane and De Guindos, who all seems to lean towards a tapering debate sooner rather than later.
In the euro docket, Producer Prices during July will be the sole release later in the session. Across the pond, the usual weekly Claims are due along trade balance figures and Factory Orders.
What to look for around EUR
EUR/USD’s rally goes for another chance to re-test 1.1850 and even advance further, always amidst the broad-based selling pressure in the dollar. The cautious note from Powell at his latest speech sponsored a strong pullback in the dollar, which eventually underpinned the recovery in the pair. Looking at the broader picture, the ongoing recovery in the pair from YTD lows (August 20) tracks the improvement in the risk complex as well as the corrective downside in the buck. Furthermore, the ongoing dovish stance from the ECB is expected to be put to the test at next week’s event amidst rising tapering speculation, the healthy economic recovery in the region and the high morale among market participants.
Key events in the euro area this week: Producer Prices (Thursday) – Final Services PMIs (Friday).
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 0.05% at 1.1845 and faces the next up barrier at 1.1857 (monthly high Sep.1) followed by 1.1908 (monthly high Jul.30) and finally 1.1952(100-day SMA). On the downside, a break below 1.1815 (55-day SMA) would target 1663 (2021 low Aug.20) en route to 1.1612 (monthly low Oct.20 2020).