- EUR/USD stays well on the defensive near 1.1800.
- The rebound in the dollar puts the pair under extra pressure.
- EMU final Core CPI, US Retail Sales next of relevance in the calendar.
The selling pressure remains well and sound around the shared currency and drags EUR/USD back to the 1.1800 neighbourhood at the end of the week.
EUR/USD offered on USD-strength, focus on data
EUR/USD sheds ground for the second session in a row and challenges the key 1.1800 support on Friday, always in response to the persistent buying bias in the dollar and shrinking German yields.
In fact, yields of the key German 10-year reference sink to the area of recent lows around -0.34% at the end of the week, levels last seen back in April.
The better note in the buck comes after Fed-speakers have recently opened the door to the probability that QE tapering could kick in earlier than markets anticipate, likely by the end of the current year. In addition, Fed’s Powell hinted at the idea that high inflation could last longer than estimated.
In the euro docket, final June EMU inflation figures are due next. Across the pond, Retail Sales and the advanced Consumer Sentiment for the month of July will grab all the attention.
What to look for around EUR
The resumption of the downside in EUR/USD challenges the 1.1800 with rising bets for another visit to monthly lows in the 1.1770/80 band in the not-so-distant future. As usual in past weeks, price action around spot is expected to exclusively hinge on dollar dynamics, particularly as investors continue to adjust to the Fed’s hawkish message, prospects of higher inflation in the US and potential QE tapering earlier than anticipated. On the euro side of the equation, support for the European currency in the form of auspicious results from fundamentals in the bloc now appears somewhat mitigated considering recent data, although the investors’ morale remains high amidst the persistent optimism surrounding a strong rebound in the economic activity in the second half of the year.
Key events in the euro area this week: EMU Final June CPI (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. Investors’ shift to European equities in the wake of the pandemic.
EUR/USD levels to watch
So far, spot is losing 0.02% at 1.1808 and a breakdown of 1.1771 (monthly low Jul.14) would target 1.1762 (78.6% Fibo of the November-January rally) and route to 1.1704 (2021 low Mar.31). On the other hand, the next hurdle is located at 1.1895 (weekly high Jul.6) followed by 1.1975 (weekly high Jun.25) and finally 1.2002 (200-day SMA).