The shared currency is eroding part of yesterday’s gains vs. the Greenback and is now dragging EURUSD to the area of daily lows in the 1.1190/80 band.
13 August 2019, GKFX – The pair trades on the defensive so far on Tuesday on the back of the continuation of the rebound in the demand for the Greenback, and always against the backdrop of declining yields and unremitting ‘flight-to-safety’ stance in the global markets.
Investors remain cautious despite the absence of fresh news on the US-China trade front, while new concerns on the geopolitical scenario have emerged following the recent developments in Hong Kong and the potential reaction from China, all adding extra support to the demand for safe havens.
In today’s docket, final July German CPI matched the preliminary readings, showing consumer prices up 0.5% MoM and 1.7% from a year earlier. Later in the European morning, the key German ZEW survey should shed further light on the performance of investors’ morale in the first economy of the block and in the euro region for the current month.
Across the pond, inflation figures tracked by the CPI will be the salient event later today seconded by the NFIB index and the API report on US crude oil inventories.
What to look for around EUR
The reluctance of EUR to edge lower in the current risk-off environment could be reflected in ‘repatriation’ forces currently at play as well as the potential funding stance of the currency. Italian politics has resurfaced as a source of uncertainty as of late and is expected to weigh on the sentiment sooner rather than later.
Sustained bullish attempts in the pair still look flimsy amidst ECB’s preparations for a fresh wave of monetary stimulus (most likely to be announced in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system.
In the meantime, the unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen capping extra gains and are also lending extra support to the dovish stance of the ECB.
EURUSD technical analysis
At the moment, the pair is retreating 0.21% at 1.1189 and faces the next down barrier at 1.1161 (low Aug.12) seconded by 1.1101 (monthly low Jul.25) and finally 1.1026 (2019 low Aug.1). On the flip side, a breakout of 1.1232 (55-day SMA) would target 1.1282 (high Jul.19) en route to 1.1292 (200-day SMA).
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