- EUR / USD extends the rally from Monday’s lows around 1.1770.
- The Spanish CPI rose 0.5% month-on-month and 3.3% year-on-year in August.
- The US CPI for the month of August will be the highlight event on Tuesday.
The common currency extends Monday’s small gains and motivates the pair EUR / USD to revisit the 1.1830 region on Tuesday.
EUR / USD: Focus on key US data
The EUR / USD advances for the second day in a row and it extends optimism into the first half of the week after the loss of buying interest around the dollar and the cautious stance of investors ahead of the major data releases on the US economic calendar.
The best tone around the euro continues supported by strong rebound in 10-year German Bund yields to -0.30%, levels last seen in mid-July, and in that of the US 10-year bond at levels close to 1.35%.
Publications in the economic calendar of the euro saw how the Spanish CPI rose 0.5% month-on-month and 3.3% year-on-year in August, while the IPCA rose 0.4% and 3.3% in the last twelve months.
Later in the American session, investors will closely follow the publication of inflation figures in the United States measured by the CPI, with analysts expecting main prices to rise 5.3% YoY and core prices rise 4.2% compared to last year.
What can we expect around the EUR?
EUR / USD managed to close the session on Monday with slight gains and is now climbing to the 1.1830 zone amid a stable dollar and higher yields. With the pessimistic “recalibration” of the ECB already priced in, investors now seem to have diverted attention to inflation fears and the progress of the Delta variant, which, together with speculations of reduction in the purchase of bonds of the Fed, they are expected to limit the bullish potential of the pair for now.
Key events in the eurozone this week: Industrial production (Wednesday) – Trade balance (Thursday) – CPI end of August of the euro area (Friday).
Background events: 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. The German elections in September could bring some political nervousness to the stage. Investors’ switch to European equities in the wake of the pandemic could provide additional oxygen to the common currency. Speculation on the reduction of the purchase of bonds by the ECB.
EUR / USD levels
At the time of writing, the EUR / USD pair is gaining 0.10% on the day, trading at 1.1822. The next resistance is at 1.1909 (September 3 high), followed by 1.1935 (100-day SMA) and 1.2000 (psychological level). On the other hand, a break below 1.1770 (Sept. 13 low), would head to 1.1704 (March 31 low) on its way to 1.1663 (Aug. 20 low).
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