EUR/USD has erased its earlier gains to the vicinity of 1.1130 and is now navigating daily lows in sub-1.1100 levels.
Spot has managed to regain buying interest after the key German IFO survey surprised markets to the upside for the current month, showing a tepid rebound from previous readings and allowing traders to assess the possibility that sentiment in the German economy could have bottomed out.
However, the up move lacked of follow-through in the proximity of the 100-day SMA around 1.1130, motivating sellers to return to the market and force the pair to drop to lows in the sub-1.1100 area.
Other than the German IFO, the ECB published its Survey of Professional Forecasters (SPF), where the central banks has revised lower its prospects for inflation, real GDP growth and unemployment.
The upside momentum in the pair has extended to the 1.1180 region on Monday, where it met some strong resistance and sparked a correction lower to the area below the 1.1100 mark in the wake of the ECB meeting. Despite the recent rally in spot has been exclusively sponsored by weakness in the Dollar, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.
At the moment, the pair is losing 0.04% at 1.1099 and a breach of 1.1093 (low Oct.24) would target 1.1044 (55-day SMA) en route to 1.0925 (low Sep.3). On the upside, the next hurdle aligns at 1.1171 (monthly high Oct.18) seconded by 1.1186 (61.8% Fibo of the 2017-2018 rally) and finally 1.1202 (200-day SMA).
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