EUR/USD comes under pressure near 1.1860

• EUR/USD recedes to 2-day lows near 1.1860.
• The recovery in the dollar weighs on the pair.
• German Factory Orders expanded 3.4% MoM in July.

The better note in the greenback now drags EUR/USD to the area of 1.1860 at the beginning of the week, or 2-day lows.

EUR/USD: Upside seen limited above 1.1900

EUR/USD trades on the defensive for the first time after six consecutive daily advances and comes under pressure following Friday’s rejection from new tops beyond 1.1900 the figure soon after the US Nonfarm Payrolls disheartened market participants at the end of last week.

In fact, the dollar receded to new lows on Friday, while EUR/USD advances past the 1.1900 yardstick for the first time since early August after the dismal job creation in the US economy during last month (235K).

The poor prints from the US labour market report now give extra oxygen to speculations that the Federal Reserve could start trimming its bond-purchase programme at the November or December meetings (in detriment of the September event).

Data wise in Euroland, Factory Orders in Germany expanded at a monthly 3.4% in July, while the Construction PMI eased to 44.6 in August. Later in the session, the Sentix Index for the month of September is due.

What to look for around EUR

The upside momentum in EUR/USD took another step and re-visited the 1.1900 neighbourhood on Friday, although the move was ephemeral. Looking at the broader picture, the ongoing recovery in EUR/USD from YTD lows (August 20) tracks the improvement in the risk complex as well as the intense corrective downside in the buck. However, and despite the recent hawkish tilt from ECB-speakers regarding scaling back the bank’s stimulus programme sooner rather than later, consensus seems to be shaping up around the likeliness that Lagarde could talk down these tapering hopes at the ECB meeting later in the week, which in turn carries the potential to cap the upside in the pair.

Key events in the euro area this week: German Factory Orders, EMU Sentix Index (Monday) – German Industrial Production, German/EMU ZEW survey, EMU flash Q2 GDP (Tuesday) – German Trade Balance, ECB meeting (Thursday) – Final German CPI, EuroGroup meeting (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 in September could bring some political jitters to the scenario. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is losing 0.12% at 1.1863 and a break below 1.1814 (55-day SMA) would target 1.1663 (2021 low Aug.20) en route to 1.1612 (monthly low Oct.20 2020). On the upside, the next resistance lines up at 1.1909 (monthly high Sep.3) followed by 1.1949 (100-day SMA) and finally 1.2000 (psychological mark, 200-day SMA).