EUR/USD REGAINS 1.1800 AND BEYOND, CLIMBS TO MULTI-WEEK HIGHS

• EUR/USD extends the recovery past the 1.1800 yardstick.
• German Unemployment Rate came in at 5.5% in August.
• EMU’s flash inflation figures next of relevance in the calendar.

The buying interest around the European currency picks up extra pace and lifts EUR/USD to new 4-week peaks above 1.1800 the figure.

EUR/USD LOOKS TO DATA

EUR/USD advances for the third consecutive session and finally leaves behind the 1.1800 barrier on the back of the persistent selling pressure surrounding the dollar, particularly after Powell’s speech last Friday.

In fact, Monday’s bullish “outside day” remains well in play coupled with month-end flows, all adding extra legs to the rebound in EUR/USD from fresh 2021 lows near 1.1660 recorded earlier in the month.

In the domestic calendar, the German Unemployment Changed dropped by 53K and the jobless rate ticked lower to 5.5% in August. Later in the session, preliminary inflation figures in the broader Euroland are due.

Across the Atlantic, the Consumer Confidence print gauged by the Conference Board will take centre stage followed by the FHFA’s House Price Index, the S&P/Case-Shiller Index, the Chicago PMI and the weekly report by the API on US crude oil inventories.

What to look for around EUR

EUR/USD finally retakes the area above 1.1800 amidst the generalized selling pressure in the dollar. The cautious note from Powell at his latest speech sparked a strong downside pressure in the dollar, which eventually underpinned the recovery in the pair. Looking at the broader picture, the ongoing recovery in the pair from YTD lows (August 20) 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.

Key events in the euro area this week: German labour market report, EMU flash CPI (Tuesday) – German Retail Sales, final Manufacturing PMIs (Wednesday) – final Services PMIs (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 in September could bring some political effervescence to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency.

EUR/USD levels to watch

So far, spot is gaining 0.28% at 1.1829 and faces the next up barrier at 1.1908 (monthly high Jul.30) followed by 1.1954 (100-day SMA) and finally 1.2001 9200-day SMA). On the downside, a break below 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).