EUR/USD clings to daily gains, still below 1.1100

• EUR/USD remains firm albeit below 1.1100.
• The greenback stays sidelined and on the defensive.
• Investors’ attention remains on trade developments.

After a failed attempt to retake the 1.1100 neighbourhood during early trade, EUR/USD is now retreating to the 1.1080 region following a mild pick up in the buck.

EUR/USD focused on trade headlines

The pair has regained the smile on Wednesday following a negative start of the week. Indeed, the renewed sentiment in the greenback forced spot to recede from Monday’s peaks in the 1.1170/80 band to yesterday’s lows in the vicinity of 1.1060, where some initial contention emerged.

In fact, auspicious news surrounding the US-China trade front and the likelihood that the US could lift some of the existing tariffs on Chinese products have bolstered the up move in yields in past sessions, lending at the same time extra wings to the dollar.

Today, investors appear to have digested this news and look more cautious, prompting some correction in yields while the US Dollar Index retreated from tops.

In the docket, final Services PMIs for the month of October in the euro area came in better-than-expected, while Retail Sales in the bloc also surprised to the upside. Across the pond, Non-farm Productivity contracted 0.3% QoQ in Q3 and Unit Labor Costs expanded 3.6% inter-quarter, surpassing estimates.

What to look for around EUR

The pair has come under extra selling pressure since the beginning of the week on the back of the renewed buying interest in the buck and the broad-based improvement in the sentiment around the riskier assets. In the meantime, the failure to break above October’s high near 1.1180 triggered a move lower to the 1.1070 region, coincident with recent lows. In spite of occasional positive results in the euro docket, the outlook in Euroland remains fragile and does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the medium term at least. In addition, the possibility that the German economy could slip into recession in Q3 remains a palpable risk for the outlook and is expected to weigh on EUR in the short/medium term horizon.

EUR/USD levels to watch

At the moment, the pair is gaining 0.08% at 1.1082 and faces the next up barrier at 1.1119 (100-day SMA) followed by 1.1179 (monthly high Oct.21) and finally 1.1186 (61.8% Fibo of the 2017-2018 rally). On the downside, a breakdown of 1.1063 (monthly low Nov.5) would target 1.1043 (55-day SMA) en route to 1.0925 (low Sep.3).