The 1.1900 mark has been acting as a kind of ceiling for the EUR/USD pair since the end of June.
The inability to once again overcome this mark on September 3 against the background of the release of a weak report on the US labor market led to the fact that it was under selling pressure.
According to the results of the last five days, the EUR/USD pair lost more than 60 points. Starting at 1.1880 on Monday, it ended Friday's trading near 1.1815.
At the same time, the greenback managed to achieve a positive result for the first time in three weeks, adding about 0.6% against the euro.
On Friday, the protective dollar sank to local lows around 92.35 points amid some improvement in market sentiment. This was largely due to the fact that Chinese President Xi Jinping and US President Joe Biden held lengthy telephone talks, initiated, apparently, by the head of the White House, who wanted to revive the dialogue between the two countries.
Encouraged by the fact that the Chinese and American leaders "talked heart to heart", US stock futures showed an increase of 0.3% at the opening of trading, extending a helping hand to the bulls for EUR/USD and pushing the pair to three-day highs in the area of 1.1850.
However, the optimistic mood in the markets weakened quite quickly, as inflation concerns, which intensified after the publication of the August report on US producer prices, overshadowed hopes for easing tensions between Washington and Beijing.
Statistical data released on Friday showed an acceleration in the growth rate of producer prices in the United States last month to the highest since November 2010 of 8.3% in annual terms.
As a result, the US currency was able to recoup its losses, while the key US stock indexes fell by almost 1%, ending the past week in the red zone, as did the main currency pair.
On Monday, the single currency was again under pressure, and the EUR/USD pair fell to its lowest level in just over two weeks near 1.1770.
Meanwhile, the USD index rose above 92.88 points for the first time since August 27.
According to analysts of National Australia Bank, currently a number of factors favor the strengthening of the dollar, including a reluctance to take risks, since even in countries with a high proportion of the vaccinated population, such as Singapore and the United Kingdom, there are spikes in the incidence of COVID-19.
This is joined by concerns about the imminent curtailment of monetary support from the Federal Reserve to challenge buyers of risky assets.
These concerns were supported today by the president of the Federal Reserve Bank of Philadelphia, Patrick Harker, who said that he supports the early curtailment of incentives.
"I would like to start the process of reducing QE in the near future, so that we can complete it earlier if we need to increase the interest rate so that we have a free hand. And I think we need to consider this option," he said.
This puts the focus on the FOMC meeting, which will be held at the end of September. Data on US consumer prices on Tuesday, as well as on retail sales and industrial production, which will be released later this week, will be carefully studied ahead of the US central bank meeting.
According to forecasts, annual inflation in the country slowed to 5.3% in the previous month from July's 5.4%, industrial production increased by 0.4%, and retail sales decreased by 0.8%.
Although the US central bank is likely to refrain from announcing a reduction in QE in September, Fed Chairman Jerome Powell could hint that such a move will happen at the next meeting.
"The Fed seems ready to start scaling back its stimulus this year. However, even with the tendency for monetary policy to become less accommodative around the world, financial conditions remain ultra-soft, which limits the opportunities for the dollar to grow," TD Securities analysts noted.
HSBC is more positive about the prospects for USD.
"The Fed's path to policy normalization should support the dollar gradually, especially when QE tapering actually begins," the bank's strategists said.
They expect the euro to weaken against the US currency to $1.15 by the end of the year.
The recent hawkish comments of the Fed representatives support the dollar, while the euro is suffering not only from a weakening of the risk appetite, but also from the uncertainty associated with the upcoming parliamentary elections in Germany.
An ARD poll conducted shortly after the 90-minute Sunday TV debate showed that 41% of respondents believe that the Social Democrat candidate for the post of the next German Chancellor, Olaf Scholz, was more convincing than his rival from the CDU/CSU bloc, Armin Laschet (27%) and the Green candidate Annalena Baerbock (25%).
The markets predict the formation of a trilateral coalition, but this means several months of uncertainty, since negotiations will take more time.
The beginning of a new week did not bring relief to the EUR/USD pair.
A break below 1.1750 should clear the way for big losses. Further, support passes at 1.1725, 1.1695 and 1.1660.
On the other hand, resistance levels can be seen around 1.1815, followed by 1.1835, 1.1850 and 1.1885.