The EUR/USD pair is re-testing the important resistance level of 1.1870.
In a risk-on environment, the dollar remains on the defensive.
Later in the session, the Fed releases its Monetary Policy Report.
The purchasing pressure on the European currency is still strong, pushing EUR/USD back to the 1.1870 area, or 3-day highs.
EUR/USD has gained approximately a penny from fresh lows in the 1.1780 region (Wednesday/Thursday) to the current 1.1870 range, adding to the optimism observed in the second half of the week.
On the basis of dollar weakening, spot garnered new purchasing interest, which is backed up by invertors’ preference for riskier assets.
The focus switched to the ECB’s Accounts of the June meeting in the absence of important disclosures in the euro docket, the widely anticipated conclusions of the ECB’s strategy review (Thursday), and nothing fresh from Lagarde in her address on Friday.
In fact, many members advocated for reducing the asset purchase program in light of the improved GDP and inflation forecasts. In terms of the latter, members believe long-term inflation expectations are still low, but they emphasize the need of looking past the temporary rise in consumer prices.
Higher market rates, according to the Accounts, could result in tighter borrowing conditions.
For the time being, the recent significant reversal in EUR/USD appears to have hit some fair resistance around 1.1780. In the meantime, spot price movement is expected to be dominated by dollar dynamics, especially after the previous FOMC meeting bolstered expectations of rising inflation and perhaps tapering earlier than planned. Further out, the European currency is supported by positive outcomes from the bloc’s fundamentals, as well as improved morale, a significant comeback in economic activity, and investors’ desire for riskier assets.
On the back boiler, there are a number of important considerations to consider: In the region, there has been an asymmetric economic recovery. The rate of increase in inflation is likely to continue. The vaccine’s dissemination is progressing. Political effervescence around the EU Recovery Fund is likely. Elections in Germany. The move of investors to European equities.
So far, spot is up 0.19 percent at 1.1865 and confronts resistance around 1.1895 (weekly high July 6), 1.1975 (weekly high June 25), and eventually 1.2000. (200-day SMA). A breach of 1.1781 (monthly low Jul.7), on the other side, would target 1.1762 (78.6 percent Fibo of the November-January rally) and lead to 1.1704. (2021 low Mar.31)./n
