After rising above the 1.20 handle for the first time since early January of 2015 on Tuesday, the EUR/USD pair struggled to extend its gains during the second half of the week and is looking to close the week with losses. As of writing, the pair was trading at 1.1867, losing 0.35% on the day.
On Friday, the greenback came under a heavy selling pressure in the early NA session amid softer-than-expected nonfarm employment increase but was able to quickly gain traction with the help of robust manufacturing PMI data. On a weekly basis, the US Dollar Index is headed for a positive close and is now at 92.75, gaining 0.18% on the day.
In addition to the greenback recovery, the shared currency is losing strength against its peers on increasing speculation surrounding the ECB’s approach to QE tapering. A recent Bloomberg article citing euro-area officials familiar with the matter claimed that the ECB policy makers might not be ready to make a final decision on the QE program until a couple of weeks before the current program ends. In previous weeks, some ECB officials voiced their concerns over the increasing strength of the euro, which could make it difficult for the bank to reach its inflation target rate.
ECB may not have final QE plan ready until December – Bloomberg
On Monday, the pair is likely to remain in a tight trading range as the economic calendar will be featuring the PPI data for the euro area and the US markets will be closed due to the Labor Day holiday.
ECB Preview: Focus likely to be on the euro – Danske Bank
Valeria Bednarik, Chief Analyst at FXStreet, writes, “…the key support area for the days to come is the 1.1790/1.1820 region, as the pair bottomed around it multiple times during the past August. Below it then, 1.1740 comes next with a clear break below this last exposing 1.1660, another major long-term support. The first line of selling interest stands at 1.1920, but it will take a steady advance beyond 1.1960 to see the pair extending up to the 1.2030/70 region. Beyond 1.2100, January 2015 high, the pair has scope to extend its advance up to 1.2330.”
EUR/USD scope for a test of 1.21/1.22 – Scotiabank
Today’s data from the U.S.
US: Total nonfarm payroll employment increased by 156,000 in August
US: Manufacturing output expands at weakest pace since June 2016 – Markit
US: Economic activity in the manufacturing sector expanded in August – ISM
US: Construction spending in July 2017 estimated at seasonally adjusted annual rate of $1,211.5 billion
US: Index of Consumer Sentiment eased to 96.8 in August – UoM
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