In the second half of the week, EUR/USD trades in a tight range around 1.1760/70, with bullish momentum expected to continue.
- On Thursday, the EUR/USD remains moderately offered at 1.1760.
- The focus of investors has now shifted to the Jackson Hole event.
- The ECB’s Accounts for the most recent meeting will be released.
EUR/USD looks to the ECB, Wyoming
On Wednesday, EUR/USD appeared to have run into some solid resistance beyond 1.1770, or weekly highs.
Since the beginning of the week, the dollar has been weighed down by an overall better tone in the risk-associated market, backing a spot bounce from new YTD lows near 1.1660. (August 20).
The single currency manages well to leave behind disappointing figures from flash PMIs in the core Euroland as well as mixed readings from the German IFO survey. Earlier in the session, the German Consumer Confidence tracked by GfK missed estimates at -1.2 for the month of September (from -0.4).
Meanwhile, over in the U.S., Initial Claims and a second revision to Q2 GDP will take center stage later in the month.
What to look for around EUR
The recovery in EUR/USD seems to have met initial and quite moderate hurdle in the 1.1770/75 band for the time being, leaving intact the next target at the 1.1800 neighbourhood. The ongoing recovery in the pair from yearly lows tracks the improvement in the risk complex as well as the corrective downside in the buck. However, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep spot under pressure despite the healthy economic recovery in the region, which in turn stays propped up by the high morale among market participants.
This week’s key events in the eurozone include the German GfK Consumer Confidence Survey and the ECB Accounts (Thursday).
On the back boiler, there are a number of important aspects to consider: In the region, there has been an asymmetric economic recovery. The rate of increase in inflation is likely to continue. The Delta form of the coronavirus is progressing, as is the vaccine campaign’s speed. Political effervescence around the EU Recovery Fund is likely. The upcoming German elections in September may add some political zing to the situation. As a result of the epidemic, investors are flocking to European shares, which may give the euro a boost.
EUR/USD levels to watch
So far, spot is losing 0.10% at 1.1759 and a breakdown of 1.1663 (2021 low Aug.20) would target 1.1612 (monthly low Oct.20 2020) en route to 1.1602 (monthly low Nov.4 2020). On the upside, the next resistance is located at 1.1804 (weekly high Aug.13) followed by 1.1814 (50-day SMA) and finally 1.1908 (monthly high Jul.30).