EUR/USD holds steady just above 1.1700 to start European trading
Despite a softer US retail sales report yesterday, the dollar was the top performer and that heaped pressure on EUR/USD towards the lows for the year as sellers try to take on daily support at 1.1704-11.
They fell short of breaching the key level, but it remains one to watch considering the lack of positive factors playing out for the euro at the moment.
Delta variant concerns, while impacting the US recovery, are also a key risk to the euro area economy as seen with the rising cases in Germany and its impact on the region's outlook going into the latter stages of Q3 and Q4 particularly.
The growth momentum in Europe is slowing and has arguably peaked in the summer and with the ECB still maintaining that inflation is 'transitory', rate differentials (or at least expectations) aren't going to work in the euro's favour either.
Looking at the chart above, the pressure is certainly on as price retests the 1.1704-11 support and more specifically the 1.1700 level. I would expect stops to be lined up below the figure level so a break there will likely lead to a sharp downside move.
The next target below 1.1700 will be the September and November 2020 lows near 1.1600.
From a technical perspective, buyers have plenty of work to do to convince of any significant bounce from current levels. The key hourly moving averages @ 1.1752-55 is the first key test but then there's the 1.1800 and 1.1900 levels next limiting gains.
With the dollar in a good spot in any scenario as of late i.e. risk aversion benefits the dollar while more positive data helps to firm Fed taper expectations, also helping the dollar; that's a tall order to see buyers sustain much upside momentum.
