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EUR/USD retreats from 2020 highs ahead of NFP


7 August 2020

EUR/USD tests 1.1820 following Thursday’s new YTD peaks above 1.19. German Industrial Production, trade figures surprise to the upside. US Non-farm Payrolls coming up later in the NA session.

Following fresh tops near 1.1920 on Thursday, EUR/USD has sparked a corrective downside to the 1.1820/15 band at the end of the week.

EUR/USD is retreating moderately on Friday, shedding around a cent since Thursday’s new peaks near 1.1920, all in response to the recovery in the demand for the greenback.

In fact, overbought conditions – as per the daily RSI - are sponsoring the (overdue?) knee-jerk on the pair to the 1.1820 region so far, in line with the broader move lower in the risk complex.

Market participants, in the meantime, continue to look to US politics, where a new coronavirus stimulus package is still debated between Republicans and Democrats.

Data wise in the Old Continent, German Industrial Production expanded at a monthly 8.9% during June, while the sharp pick-up in exports motivated the trade surplus to almost double at €14.5 billion during the same period (from €7.5 billion). Upbeat results in France and Spain also saw the Industrial Production expanding 12.7% MoM and 14% MoM, respectively.

Later on Friday, the US Non-Farm Payroll will be the salient event. Market consensus expects the economy to have added 1.6 million jobs during July and the jobless rate to have ticked lower to 10.5% (from 11.1%).

What to look for around EUR


EUR/USD pushed higher and recorded new highs near 1.1920 on Thursday, triggering the subsequent leg lower to around a cent lower. The July rally, while largely triggered by broad-based dollar-selling and improved sentiment in the risk-associated universe, found extra sustain in auspicious results from domestic fundamentals, which have been in turn supporting further the view of a strong economic recovery in the wake of the coronavirus fallout. Also lending wings to the momentum around the euro appear the recently clinched deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region.

EUR/USD levels to watch


At the moment, the pair is losing 0.40% at 1.1828 and faces immediate contention at 1.1695 (weekly low Aug.3) followed by 1.1495 (monthly high Mar.9) and finally 1.1448 (50% Fibo of the 2017-2018 rally). On the other hand, a breakout of 1.1916 (2020 high Aug.6) would target 1.1996 (high May 14 2018) en route to 1.2032 (23.6% Fibo of the 2017-2018 rally).

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