EUR/USD struggles for direction above 1.1800 ahead of data

• EUR/USD trades directionless above the 1.18 mark on Tuesday.
• EMU’s flash Q2 GDP figures, Employment Change next on tap.
• Normal activity returns to the US markets following Monday’s holiday.

The single currency trades on a cautious note and keeps EUR/USD above the 1.18 yardstick on turnaround Tuesday.

EUR/USD looks to data, USD dynamics

Following five consecutive daily drops, EUR/USD is looking to reverse that trend on Tuesday against the backdrop of dominating cautiousness among traders in light of the upcoming ECB event (Thursday).

In fact, all eyes are upon the ECB meeting, where the assessment of the economic recovery in the region and the exchange rate level are expected to be in the centre of the debate. Regarding the latter, it is worth recalling that recent comments by ECB’s Board member P.Lane appear to have sponsored some fresh wave of EUR-selling, particularly in the speculative community.

Data wise in the euro region, another estimate of the GDP for the April-June period is due along with Employment Change during the same period. Earlier in the session, German trade surplus widened to $18.0 billion during July.

Across the pond, the US docket returns albeit on a light fashion and with the releases of the NFIB Index and the IBD/TIPP Economic Optimism index.

What to look for around EUR

EUR/USD managed to test the area just above 1.20 the figure at the beginning of the month. However, bulls failed to extend the rally further north, sparking a leg lower to the area below the 1.18 level so far instead. In the broader picture, the bearish view on the dollar continues to sustain the underlying constructive bias in the pair, all accompanied by the improved sentiment in the risk-associated universe, auspicious results from domestic fundamentals - which have been in turn supporting further the view of a strong economic recovery following the coronavirus crisis – as well as US-China positive headlines. Also lending wings to the momentum around the euro appear the deal on the European Recovery Fund – which helped putting political fears within the bloc to rest (for now) – and the solid position of the current account in the region.

EUR/USD levels to watch

At the moment, the pair is losing 0.05% at 1.1806 and faces the next support at 1.1789 (weekly low Sep.3) seconded by 1.1754 (weekly low Aug.21) and finally 1.1695 (monthly low Aug.3). On the other hand, a move above 1.2011 (2020 high Sep.1) would target 1.2032 (23.6% Fibo of the 2017-2018 rally) en route to 1.2413 (monthly high Apr.17 2018).