EUR/USD Forecast: trims earlier gains, back near 1.1070

• The daily up move in EUR/USD faltered near 1.1090.
• The greenback regains ground lost, back near 98.00.
• EC revised lower its forecasts for growth, inflation.

After an earlier move to the 1.1090 region, the upside impetus in EUR/USD has run out of steam and motivated it to recede to the 1.1075/70 band.

EUR/USD upside lost momentum ahead of the 21-day SMA

The pair has regained some buying interest following three consecutive daily pullbacks and after bottoming out in the key area near 1.1050 earlier in the session. However, the bullish attempt lacked of follow through just below the key barrier at 1.1100 the figure, where sits the 21-day SMA.

In fact, the greenback has now left behind the initial correction lower in response to rising optimism on the US-China trade front, which in turn morphed into higher US yields and the continuation of the exodus from the safe havens.

In the docket, earlier data saw the German Industrial Production contracting 0.6% inter-month during September. Later, the European Commission updated its Autumn Economic Forecast and it now sees Euroland expanding 1.1% this year and 1.2% in 2020. Inflation is also expected lower in 2019 and 2020 at 1.2% and 1.3% in 2021.

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 1.1050 region, or multi-week 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 0.05% at 1.1072 and faces the next up barrier at 1.1117 (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 1.1054 (monthly low Nov.7) would target 1.1043 (55-day SMA) en route to 1.0925 (low Sep.3).