EUR/USD falls to a session low of 1.1210
Price range remains relatively narrow but the euro is losing some ground on the day against the dollar with the latter continuing to hold firm against the rest of the major currencies today. For EUR/USD, price is falling below its overnight lows and now touches its lowest levels since 8 March with sellers eyeing the 1.1200 handle.
In my view, the worrying part about Eurozone economic data this week is that we're seeing some softening in inflation pressures from Germany and France. Next Monday, we'll be getting the Eurozone readings and I would expect a downside skew in the report.
Expectation is for the numbers to hold steady at +1.5% y/y on the headline inflation reading while the core reading is expected to hold at +1.0% y/y.
But after the Saxony report yesterday - where there was a noticeable dip in core inflation - I reckon there's a possibility for the core reading to also dip a little tomorrow and that won't bode well for the ECB's current inflation outlook. That's something to consider ahead of the release next Monday.
As for the bigger picture in EUR/USD, there is some support to come at the 1.1200 handle with bids lined up there. But the key level to watch out for will be the 61.8 retracement level @ 1.1187. That is a key daily support level that helped to stall the previous downside move after the ECB meeting at the start of the month.
The low achieved at the time was 1.1177 so expect stops to be lined up just under that. If price does break to the downside, further support is only then seen at 1.1110 before we move towards the 1.1000 handle.
