Last week, the US dollar was knocked down by a new surge in coronavirus cases in the US. It index retreated to the June lows, having shed 0.8% since early July.
The US currency opened this trading week with a decline.
At present, investors still neglect a resurgence of COVID-19 in the US. Nevertheless, this is poses a threat to a fragile recovery on the global economy, analysts at MUFG comment on the ongoing developments.
On Sunday, Florida reported over 15,000 confirmed infection cases for the latest 24 hours. This is the record daily growth among American states since the outbreak in early spring.
On the other hand, investors regained risk-on mood in light of the news from the US-based Gilead Sciences. The biopharmaceutical company announced on Friday that its antiviral treatment, remdesivir, enables a 62 percent reduction in the risk of mortality among heavy cases of COVID-19 compared with a standard care.
Last week, the economic calendar did not contain meaningful data on the US economy. This week is loaded with macroeconomic data. The US is due to release data on consumer inflation, industrial production, and retail sales for June.
Apart from the US data, traders await a survey on the eurozone's economic sentiment from ZEW experts, the monetary policy statement from the ECB meeting on July 16, and the summit of the EU leaders on July 17-18 July.
The ECB is likely to make cautious remarks on a recovery in the eurozone's economy at its regular policy meeting on Thursday, analysts at KBC say.
The regulator will hardly venture to change its stance under the current conditions. However, the central bank could send a clear message that it is ready to introduce extra stimulus measures if necessary, they added.
Experts at Danske Bank do not expect any revision in monetary policy this week. Therefore, the ECB is unlikely to come up with the dovish stance under ongoing programs like PEPP and APP aimed at injecting liquidity. The market has already priced in the current ECB monetary policy. In this context, EUR/USD will depend on the fashion and pace of the global economic recovery. The US dollar will be more vulnerable to the gloomy prospects worldwide, thus giving in to the single European currency.
EUR/USD rebounded after hitting a local low at near 1.1265 on Friday. The currency pair extended its climb for a while. The bulls are still waiting for a clear-cut break of 1.1350 to enter the market with long positions.
The bullish energy will open the door for the pair to the highs of the last week at near 1.1370 and later towards the round level of 1.1400. From this level, the way will be free to the strongest levels of this year slightly below the key psychological level of 1.1500.
Alternatively, in case the pair retreats to the level below 1.1300, the sellers will enter the market at the level of about 1.1250. If this level is breached, the pair will come under stronger selling in the area of 1.1215 – 1.1220. Later, the pair could find support at 1.1200, 1.1170, and 1.1100. Last but not least, an important 200-period moving average is seen at near 1.1045.