The EURUSD pair surged to almost one-month highs around 1.1780 on Monday, extending gains after three weeks of recovery from 2018 lows marginally above the 1.15 figure reached in June. The main driver behind the price rise is the abating dollar impetus within the bullish trend.
The latest pressure on the greenback came from dismal US wages data on Friday. Despite better-than-expected employment data, the buck remained on the defensive following the release as weak wages growth signals moderate inflation which in turn confirms that the Fed tightening path should be gradual.
In the short term, the euro could turn more volatile as traders wait for ECB Draghi’s speech due later today. Hawkish twists in the central bank governor’s speech may send the single currency even higher, probably to the 1.18 area. However, chances for a decisive break above this level are still low as traders will be cautious ahead of this week’s US CPI report.
Technically, EURUSD needs to confirm a break above the 1.1750 region in order not to stage a retreat from current levels. The immediate upside target comes at 1.18. A break above this level will open the way to 1.1850. The risk for this scenario is the recovery in USD demand.
By Helen Rush
Senior Analyst at Capital Markets