EUR/USD regains the smile and re-targets 1.0200

• EUR/USD leaves behind Tuesday’s pullback and approaches 1.0200.
• Germany final Services PMI remained in contraction territory in July.
• US ISM Non-Manufacturing takes centre stage later in the NA session.

The generalized improvement in the risk complex lifts EUR/USD back to the vicinity of the 1.0200 neighbourhood on Wednesday.

EUR/USD up on dollar weakness

Following Tuesday’s sudden retracement, EUR/USD manages to regain balance and resumes the upside with immediate target at the 1.0200 region midweek ahead of the weekly top near 1.0300 (August 2).

The recovery in the pair follows diminishing risk aversion in the global markets, despite developments from Pelosi’s visit to Taiwan should keep gathering attention in the very near term.

No news from the euro docket, where final prints saw the Services PMI in Germany at 49.7 and 51.2 in the broader Euroland. Earlier in the session, the German trade surplus widened to €6.4B in June.

Across the pond, the attention is expected to be on the ISM Non-Manufacturing seconded by the final S&P Global Services PMI, Factory Orders and the speech by Philly Fed P.Harker.

What to look for around EUR

EUR/USD’s rebound came short of the 1.0300 region so far on Tuesday amidst a moderate recovery in the greenback, which appeared propped up by the re-emergence of the risk aversion.

Price action around the European currency, in the meantime, is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.

On the negatives for the single currency emerges the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment readings among investors and the renewed downtrend in some fundamentals.

Key events in the euro area this week: Germany Balance of Trade, Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of monetary conditions. Impact of the war in Ukraine on the region’s growth prospects and inflation.

EUR/USD levels to watch

So far, spot is advancing 0.20% at 1.0180 and a breakout of 1.0293 (monthly high August 2) would target 1.0417 (55-day SMA) en route to 1.0615 (weekly high June 27). Next on the downside comes the next support at 1.0096 (weekly low July 26) seconded by 1.0000 (psychological level) and finally 0.9952 (2022 low July 14).