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EUR/USD clings to gains near 1.1940, looks to US calendar

  • EUR/USD adds to Thursday small gains near 1.1940.
  • German GfK Consumer Climate surprised to the upside.
  • US June PCE takes centre stage later in the NA session.

The single currency remains mildly bid and motivates EUR/USD to extend the side-lined mood around 1.1940 at the end of the week.

EUR/USD looks to US data

EUR/USD adds to Thursday’s gains although it remains largely in a consolidative mode well above 1.1900 the figure and following Monday’s strong reversion of the previous leg lower.

The bid bias appears propped up by the better tone in German yields, with the 10-year Bund hovering around the -0.17% for the time being. The favourable context in the broad risk complex also keeps the downside limited as well as the steady performance of the greenback.

On another front, ECB’s Luis De Guindos was live on a Spanish radio early in the European morning and suggested that current stimulus under the ECB programme should be removed gradually, while he expects current high inflation to remain temporary.

Earlier in the session, the German Consumer Climate tracked by GfK improved to -0.3 for the month of July, while ECB’s M3 Money Supply expanded 8.4% on a year to May and Private Sector Loans expanded 3.9% from a year earlier. In addition, the European Council will carry on with its 2-day meeting.

In the US data space, the focus of attention will be on the release of the PCE (the Fed’s preferred inflation gauge) seconded by Personal Income/Spending and the final June U-Mich index.

What to look for around EUR

EUR/USD’s recovery lost momentum in the 1.1970/80 band for the time being. Price action around the pair is expected to exclusively follow the dollar dynamics, at least in the very near term and particularly after the latest FOMC event. In the meantime, 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 GfK Consumer Confidence, European Council meeting (Friday).

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 gaining 0.08% at 1.1941 and faces the next resistance at 1.1994 (200-day SMA) followed by 1.2029 (100-day SMA) and finally 1.2064 (38.2% Fibo retracement of the November-January rally). On the other hand, a break below 1.1847 (monthly low Jun.18) would target 1.1835 (low Mar.9) and route to 1.1704 (2021 low Mar.31).

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