- EUR/USD traded directionless above the 1.18 handle on Tuesday.
- Next up will be EMU’s flash Q2 GDP data and employment changes.
- After the holiday on Monday, the US markets will resume normal activity.
The single currency trades cautiously and holds. EUR/USD. It was above the 1.18 level at the turn on Tuesday.
EUR/USD focuses on data and USD dynamics.
Following five consecutive daily declines, EUR/USD is expected to reverse the trend on Tuesday, with trader caution dominating in light of the upcoming ECB event (Thursday).
Indeed, all eyes are focused on the ECB meeting, where the assessment of the region’s economic recovery and the level of exchange rates are expected to be at the centre of the debate. With regard to the latter, it is worth recalling that recent comments by ECB Governing Council member P. Lane seem to have sponsored some new wave of euro selling, especially in the speculative community.
On the Eurozone data front, another estimate of April-June GDP will be released alongside the employment change over the same period. Earlier in the session, Germany’s trade surplus widened to $18 billion in July.
Across the ocean, the US pro-forma market returned, albeit lightly, with the release of the NFIB index and the IBD/TIPP economic sentiment index.
What to watch out for around the euro
EUR/USD managed to test the area above 1.20, which was earlier this month. However, the bulls failed to extend the rally further north, instead triggering a leg down on the area below the 1.18 level so far. More broadly, the bearish view on the US dollar continues to maintain the pair’s largely constructive bias, all of which has been accompanied by an improvement in risk-related sentiment, an auspicious outcome in domestic fundamentals – which in turn further supports the view of a strong economic recovery following the coronary crisis – and good news for the US and China. In addition, the euro was also given wings by the EBRF agreement – which helped calm political concerns within the bloc (for now) – as well as the solid current account position in the region.
EUR/USD levels to watch
Currently, the pair is down 0.05% at 1.1806 and faces the next support at 1.1789 (weekly low Sept. 3), followed by 1.1754 (weekly low Aug. 21) and finally 1.1695 (monthly low Aug. 3). On the other hand, if it rises above 1.2011 (2020 high September 1), the target would be 1.2032 (23.6% Fibo of the 2017-2018 rally) on the way to 1.2413 (monthly high April 17, 2018).