- EUR/USD remains well on the defensive in sub-1.1800 levels.
- The re-emergence of the risk-off mood continues to weigh on the pair.
- German Producer Prices surprised to the upside in June.
Sellers remain well in control of the sentiment around the single currency, with EUR/USD navigating the area of recent lows near 1.1790 on turnaround Tuesday.
EUR/USD offered on USD-buying
EUR/USD sheds ground since last Thursday on the back of the solid demand for the greenback, which in turn remains propped up by the pick-up in the risk aversion in the global markets.
Indeed, fresh coronavirus jitters exclusively stemming from the spread of the Delta variant continue to hurt the risk complex and force the pair to remain entrenched in the negative territory, as well as the rest of the risk-associated peers.
Data wise in Euroland, German Producer Prices came in above estimates in June, rising at a monthly 1.3% and 8.5% over the last twelve months. In addition, the Current Account surplus in the broader euro area shrank to €4.3 billion in May.
Later in the US docket, Housing Starts and Building Permits will be in the limelight ahead of the API’s weekly report.
What to look for around EUR
The resumption of the downside in EUR/USD puts the key 2020-2021 support line (in the 1.1770/80 band) to the test. As usual in past weeks, price action around the pair 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, recent results from key fundamentals hinted at the idea that the recovery could have stalled or lost some momentum, casting some doubts over the growth prospects into the second half of the year. In addition, the dovish stance from the ECB could well be re-affirmed or even intensified at the next event later in the week, which carries the potential to keep the euro well under pressure.
Key events in the euro area this week: ECB meeting, EMU Flash Consumer Confidence (Thursday) – EMU advanced 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. Investors’ shift to European equities in the wake of the pandemic.
EUR/USD levels to watch
So far, spot is losing 0.04% at 1.1792 and a breakdown of 1.1762 (78.6% Fibo of the November-January rally) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low). 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).