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Euro bulls push for rebound in Asian trading

Most major currencies closed in positive territory by the end of the week. The steepest gain against the US dollar was shown by the Swiss franc (+1.48%). Smaller growth was posted by the British pound (+1.18%), the euro (+0.85%), the Japanese yen (+0.74%) and the Canadian dollar (+0.70%). On the other side of the spectrum, the New Zealand dollar (-0.08%) and the Australian dollar (-0.26%) closed in the red.

On Friday, the euro closed lower amid strength in the American currency after the release of upbeat economic data. US consumer spending at a faster pace than expected in June as COVID-19 vaccinations boosted demand for travel and leisure services.

The greenback drew additional support from a speech by St. Louis Fed President James Bullard, who claimed that the Fed should start dialing back monthly bond purchases this fall and cut them "fairly quickly" to wind down the program during the first few months of 2022.

Today’s macro agenda (GMT+3)

  • 09:00 Germany: retail sales (June)
  • 09:30 Switzerland: retail sales (June) and CPI (July)
  • 10:30 to 11:30 industrial PMIs (June) in Switzerland, France, Germany, the Eurozone, and the UK
  • 16:45 US: PMI
  • 17:00 US: ISM manufacturing index (July) AND construction sector spending (June)

Current outlook

The Fed has let down the markets because of its insufficiently hawkish tapering timeline. The dollar declined across the board after the FOMC meeting, but market participants are still unable to figure out which way the dollar index will move going forward.

Major currencies have been trending slightly lower in Asian trading. By the time of writing, the euro was trading at 1.1866. The price is hovering near the 55-day SMA (balance line). On the hourly timeframe, the downward move from 1.1909 has yet to reach completion, while bearish momentum towards 1.1840 also lacks completion. Given that today is Monday, sentiment could focus on rethinking the previous week.

The daily TF showS a buy-side bias. To continue the rally, the bulls will need to resolutely break out of the 1.1900 handle. All the bears need is a retracement to Friday's low at 1.1852 and the stage will be set to continue the recovery with targets at 1.1925 and then 1.1950.

This week’s key event will be the NFP report stateside.

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