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30 Jul 2021

EUR/USD advances to new highs beyond 1.1900, recedes afterwards

  • EUR/USD extends the recovery just past the 1.19 level.
  • EMU flash CPI rose 2.2%, Core CPI gained 0.7%.
  • EMU advanced Q2 GDP expanded 2.0% QoQ, 13.7% YoY.

The single currency keeps pushing higher and encourages EUR/USD to briefly surpass the 1.1900 mark for the first time since late June.

EUR/USD up on USD-weakness, data

EUR/USD posts gains for the fifth consecutive session so far on Friday, always on the back of the renewed and strong selling bias in the dollar and positive results from the euro docket.

Indeed, the greenback remains well under pressure as investors keep digesting the outcome from the latest FOMC event (Wednesday), while US yields stay side-lined well below 1.30%.

Earlier in the session, flash inflation figures in the broader Euroland showed the headline CPI is expected to rise 2.2% on a year to July and 0.7% when comes to the Core CPI. In addition, preliminary GDP figures noted the economy is now seen expanding 2.0% QoQ in Q2 and 13.7% vs. the previous year. Further data saw the German Q2 estimate at 1.5% inter-quarter and 9.2% on an annualized basis.

Moving forward, investors will now look to the inflation figures in the US gauged by the PCE along with Personal Income/Spending and the final U-Mich print for the current month.

What to look for around EUR

The recovery in EUR/USD picks up extra pace and moves beyond 1.1900 the figure at the end of the week, always following the increasing weakness surrounding the dollar. In the meantime, dollar dynamics in response to the US economic recovery, the Fed’s dovish stance and prospects of high inflation are still expected to dictate the price action in the pair. On the euro side of the equation, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep the upside limited in spot despite auspicious results from key fundamentals and the persistent high morale in the region.

Key events in the euro area this week: German, EMU flash Q2 GDP/EMU advanced July CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities in the wake of the pandemic.

EUR/USD levels to watch

So far, spot is up 0.03% at 1.1888 and faces the next up barrier at 1.1908 (weekly high Jul.30) followed by 1.1975 (weekly high Jun.25) and finally 1.2004 (200-day SMA). On the other hand, a breakdown of 1.1751 (monthly low Jul.21) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low).

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