Following fresh 2020 highs near 1.1920 during early trade, EUR/USD has now retreated to the negative ground and navigates in the mid-1.1800s (at the time of writing).
EUR/USD is now losing some upside momentum in response to the pick-up in the demand for the greenback. In addition, the current overbought conditions of the pair carry the potential to spark some profit taking as well as a more lasting corrective downside.
Despite the ongoing knee-jerk, the underlying bullish trend appears unchanged around EUR/USD and the rest of its risk peers, while attention has now shifted to the US political scenario and the discussions around an extra stimulus package.
Earlier in the euro docket, the German Factory Orders expanded nearly 28% from a month earlier in June, adding to the idea of a ‘V’-shaped rebound in the first economy of the region. Additional data in Germany saw the Construction PMI rebounding to 47.1 during last month (from 41.3).
Later in the US data space, June’s Challenger Job Cuts are due ahead of the usual weekly Claims and the speech by FOMC’s R.Kaplan.
EUR/USD came under pressure soon after hitting new 2020 highs in the 1.1915/20 band on Thursday. The sharp move up in past weeks, while largely triggered by broad-based dollar-selling, has found extra sustain in auspicious results from domestic fundamentals, which have been in turn supporting further the view of a strong economic recovery in the wake of the coronavirus fallout. Also lending wings to the momentum around the euro appear the recently clinched deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region.
At the moment, the pair is losing 0.11% at 1.1849 and faces immediate contention at 1.1695 (weekly low Aug.3) followed by 1.1495 (monthly high Mar.9) and finally 1.1448 (50% Fibo of the 2017-2018 rally). On the other hand, a breakout of 1.1916 (2020 high Aug.6) would target 1.1996 (high May 14 2018) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally).