EUR/USD keeps the firm note, around 1.1200 on US PPI

• EUR/USD keeps the 1.1200 handle post-US data.
• Rumours on Italian snap elections stay on the rise.
• US Producer Prices rose 0.2% MoM in July.

The upbeat mood around the shared currency stays well and sound at the end of the week, with EUR/USD coming back to the 1.1200 neighbourhood after Thursday’s dip to the 1.1180/75 band.

EUR/USD looks to Italy, trade

Spot remains supported in the area of 1.1170, coincident with the 21-day SMA, while gains stay clearly limited by Monday’s tops in the mid-1.1200s.

EUR is advancing further today despite rising speculations on Italian snap elections in the near term, all following increasing frictions within the coalition government as of late. In this regard, Lega Nord’s leader M.Salvini appears as favourite winner, although without majority.

There is no fresh news on the US-China data front, although spot is likely to remain vigilant on the potential pick up in the 'flight-to-safety' mood and its impact on the greenback via lower US yields.

In the data space, German trade surplus shrunk during June while Italian final July CPI saw consumer prices coming in short of estimates at 0.0% MoM and 0.4% over the last twelve months. Across the pond, Producer Prices rose at a monthly 0.2% and 1.7% on a year to July. Core prices contracted 0.1% from a month earlier and rose 2.1% on a yearly basis.

What to look for around EUR

The sideline mood in the single currency is extending so far this week, always following USD-dynamics, concerns on the trade front and its impact on global growth and growing political effervescence in Italy. Rallies in the pair, however, look limited so far amidst absence of conviction and ECB’s preparations for a fresh wave of monetary stimulus (to be announced in September most likely), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. In the meantime, the unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR and are also lending extra support to the dovish stance of the ECB.

EUR/USD levels to watch

At the moment, the pair is gaining 0.18% at 1.1199 and breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1294 (200-day SMA). On the flip side, the next support emerges at 1.1154 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1).