EUR/USD drops to new YTD highs around 1.1640 ahead of ECB event
- EUR/USD loses further momentum and clinches fresh lows.
- Risk-off mood, month-end flows, strong dollar weigh on the pair.
- Powell and other central bankers will debate on policy later on Wednesday.
There is no respite for the downside pressure in the single currency and now drags EUR/USD to fresh 2021 lows around 1.1640.
EUR/USD weaker on USD-buying, looks to ECB
While the greenback keeps pushing higher to new YTD highs around the 94.00 mark, EUR/USD depreciates to the 1.1640 region, levels last traded back in early November 2020.
The move higher in the dollar follows month-end flows as well as persistent risk aversion, while US yields fade part of the recent sharp advance to new highs all along the curve.
In the domestic calendar, German Import Prices rose 1.4% MoM in August and 16.5% over the last twelve months. In addition, the European Commission’s final Consumer Confidence came in at -4, matching the preliminary reading.
Across the pond, MBA’s Mortgage Applications dropped 1.1% in the week to September 24. Later in the NA session, Philly Fed P.Harker is due to speak while Pending Home Sales are also scheduled.
The salient event, however, will be at the ECB Forum in Sintra, where Lagarde, Powell, Kuroda and Bailey will debate on policy.
What to look for around EUR
EUR/USD remains fragile and dropped further to the 1.1640 region, or new highs for the current year. The solid mood in the greenback keeps the pair under heavy pressure propped up by higher yields and risk-off sentiment. In the euro region, the loss of momentum in the recovery, as per some weakness seen in key fundamentals, continues to undermine the mood around the shared currency.
Key events in the euro area this week: ECB Forum in Sintra, final Consumer Confidence, ECB’s Lagarde speech (Wednesday) – German labour market report, German September flash inflation figures (Thursday) – German Retail Sales, final August PMIs, EMU preliminary inflation figures (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. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency. ECB tapering speculations.
EUR/USD levels to watch
So far, spot is losing 0.31% at 1.1647 and faces the next up barrier at 1.1755 (weekly high Sep.22) seconded by 1.1779 (55-day SMA) and finally 1.1845 (weekly high Sep.14). On the other hand, a break below 1.1640 (monthly low Sep.28) would target 1.1612 (monthly low Nov.4 2020) en route to 1.1602 (monthly low Nov.4 2020).