• EUR/USD loses further momentum and drops to 1.1240.
  • DXY retakes the 97.00 handle and above.
  • US Producer Prices surprised to the upside in June.

The selling pressure around the shared currency is now picking up pace and drags EUR/USD to fresh daily lows in the 1.1240/35 band.

EUR/USD weaker on upbeat US PPI

Spot picked up extra downside traction after US headline Producer Prices rose at a monthly 0.1% and 1.7% on a year to June, while Core prices came in above expectations, raising at an annualized 2.3% and 0.3% from a moth earlier.

Upbeat results from the US docket lent extra oxygen to the buck and lifted at the same time key yields of the US 10-year note to the vicinity of the 2.14% area, challenging weekly highs.

In the meantime, EUR/USD is closing the week on a positive note after two consecutive declines. However, the weekly up move run out of steam in the 1.1280/90 band, coincident with the 21-day SMA, and further inability to regain the topside carries the potential to spark some near term consolidation ahead of extra losses.

What to look for around EUR

The shared currency is breathing some relief after the dovish tone from Fed’s Powell and the FOMC minutes. However, this is seen as a short-live boost against the backdrop of renewed and increasing speculations of another wave of monetary stimulus from the European Central Bank in the near term, via interest rate cuts (September?) and the resumption of the QE programme. Also weighing on the currency, the dovish stance from the ECB appears reinforced by the recent appointment of ex-IMF’s C.Lagarde to succeed M.Draghi. On the macro scenario, the slowdown in the region looks unremitting and it also reinforces the current accommodative attitude of the central bank.

EUR/USD levels to watch

At the moment, the pair is retreating 0.08% at 1.1244 and faces immediate contention at 1.1193 (monthly low Jul.9) followed by 1.1181 (low Jun.18) and finally 1.1106 (2019 low May 23). On the upside, a break above 1.1286 (high Jul.11) would target 1.1324 (200-day SMA) en route to 1.1412 (high Jun.25).