Dollar a little higher on the day
The move is but a light pullback to price action in the past two days, as the dollar recovers some a bit of ground across the board but nothing remarkable.
EUR/USD is keeping lower by nearly 20 pips at 1.1733 – keeping within a 26 pips ranges so far on the day. The move lower though is still seen above its 200-hour moving average (blue line) @ 1.1731, so buyers are keeping near-term control.
That said, gains in the pair have been shallow as of late and the same argument remains even as we approach Jackson Hole. From yesterday:
I’d say there needs to be a turn above 1.1800 to really get any fresh upside leg in the pair but even then, the 30 July high at around 1.1900 adds another key resistance point.
From a fundamental perspective, the euro area economy is still trying to hold on to the summer optimism going into the latter stages of Q3 but the momentum is fading alongside the outlook as delta variant concerns weigh.
The same can be said for the US but with the tiebreaker being the ECB-Fed policy divergence, it’s hard to imagine EUR/USD sustaining any major upside in the medium-to-long term as long as the Fed stays on course to taper by year-end or early next year.
Despite the bounce to start the week, the pair remains rather uninspired and I’d say we are more likely to see a near-term tussle around the key hourly moving averages and keep under 1.1800 than observe a sustained push above that before Friday.