EUR / USD challenges 3-month lows near 1.1770

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  • EUR / USD loses ground and revisits 1.1770.
  • The dollar remains the buy bias unchanged despite lower returns.
  • The market consensus around the ECB remains on the pessimistic side.

The selling pressure around the common currency continues unabated during the European session on Monday and now forces the EUR / USD to extend the pullback and record new 3-month lows in the 1.1765 / 60 region.

EUR / USD in several-month lows

The EUR / USD moves lower for the third day in a row, moving by new 3-month lows and testing the key support line of 2020-2021.

The continuation of the downtrend in the EUR / USD pair occurs amid a stronger US dollar and risk-off sentiment, all despite persistent downward pressure on US bond yields.

Also, the fast Delta variant spread The coronavirus virus around the world continues to weigh on global growth prospects while supporting bleak sentiment in markets.

Regarding the economic calendar of the euro, the Bundesbank is expected to publish its monthly report.

Across the Atlantic, the NAHB index will be the only publication on the US economic calendar.

What can we expect around the EUR?

The resumption of the decline in the EUR / USD now flirts with the key 2020-2021 support line in the 1.1770 / 80 region. As is customary in recent weeks, price action around the pair is expected to depend exclusively on dollar dynamics, particularly as investors continue to adjust to the optimistic message from the Fed, the prospects for higher inflation in the United States. States and a possible tighter QE ahead of schedule. On the euro side of the equation, recent key fundamentals results hinted at the idea that the recovery may have stalled or lost some momentum, casting some doubt on the growth prospects in the second half of the year. Furthermore, the pessimistic stance of the ECB could reassert or even intensify in the next event at the end of the week, which has the potential to keep the euro under pressure.

Key events in the euro zone this week: ECB Meeting, Eurozone Preliminary Consumer Confidence (Thursday) – Eurozone Preliminary PMIs (Friday).

Eminent issues in the background: Asymmetric economic recovery in the region. Sustainability of the rebound in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Likely political turmoil around the EU Recovery Fund. German elections. Investors’ shift to European equities in the wake of the pandemic.

EUR / USD levels

At the time of writing, the EUR / USD pair is down 0.28% on the day, trading at 1.1768. A breakout of 1.1762 (78.6% Fibonacci retracement of the November-January move), would target 1.1704 (March 31 low) on its way to 1.1602 (November 2020 low). On the other hand, the next resistance is at 1.1895 (July 6 high), followed by 1.1975 (June 25 high) and finally 1.2002 (200-day SMA).

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