EUR/USD gives away gains and returns to the sub-1.18 area

The single currency reverses Monday’s gains vs. the dollar and forces EUR/USD to once again retreat to the area below the 1.1800 yardstick.

EUR/USD remains capped just above 1.1800

EUR/USD loses momentum and extends the consolidative stance in the lower end of the recent range and close to monthly lows in the mid-1.1700s.

The resumption of the demand for the greenback encourages dollar bulls to return to the markets and re-shift the focus to the 93.00 mark and above despite US 10-year yields creep lower always below the 1.30% level.

Lower-than-expected results from the German IFO survey in July published on Monday also collaborate with the downbeat sentiment around the European currency, although the morale remains high and the economic recovery appears unabated for the time being.

Later in the euro docket, the ECB’s M3 Money Supply and Private Sector Loans figures are due. Across the pond, the Consumer Confidence and Durable Goods Orders will be in the limelight seconded by the Richmond Fed index, house prices and the API’s report.

What to look for around EUR

The downward path in EUR/USD appears unabated so far, although the mid-1.1700s offer quite a decent support for the time being. As usual in past weeks, price action around the pair is expected to exclusively hinge on dollar dynamics, particularly following the FOMC event in June. On the euro side of the equation, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep the upside limited in spot despite auspicious results from key fundamentals and the persistent high morale in the region.

Key events in the euro area this week: German GfK Consumer Confidence (Wednesday) – German labour market report/Advanced July CPI, EMU final Consumer Confidence (Thursday) – German, EMU flash Q2 GDP/EMU advanced July CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities in the wake of the pandemic.

EUR/USD levels to watch

So far, spot is losing 0.17% at 1.1782 and a breakdown of 1.1751 (monthly low Jul.21) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low). On the other hand, the next up barrier emerges at 1.1830 (weekly high Jul.22) followed by 1.1895 (weekly high Jul.6) and finally 1.1975 (weekly high Jun.25).