EUR/USD erases gains, drops toward 1.0400 on a quiet day

• US markets are closed, price action limited.
• US dollar recovers and turns positive.
• EUR/USD unable to hold to gains, still vulnerable.

The EUR/USD dropped from 1.0461 to 1.0416, approaching the Asian session low as the US dollar recovered strength. Volatility remains limited amid low volume. US markets are closed on Monday.

Low volume on US Independence Day

The EUR/SUD shows no surprises on a quiet session across financial market amid a holiday in the US. The pair approached 1.0470 earlier on Monday but it lost momentum and pullback to the levels it closed on Friday.

The key driver has been the US dollar. After spending the day in negative territory, the DXY turned positive, rising back above 105.00. Wall Street futures are modestly lower, while European markets finished mixed.

Economic data from the Eurozone showed the Producer Price Index rose 0.6% in May, below the 1% of market consensus. The annual rate dropped from 37.2% to 36.3%, a level that continues to warrant rate hikes from the European Central Bank. The Sentix Investor Confidence tumbled from -15.8 to -26.4 in July.

Activity will return to normal on Tuesday. The next key event in the US will be on Wednesday with the FOMC minutes of its latest meeting. On Friday, the official employment report is due.

Looking vulnerable

The EUR/USD was unable to recover 1.0470, and it remains vulnerable. The lack of strength in the recovery keeps the door open to a decline to 1.0400. Below the next support is 1.0380, the last defence to the year-to-date low of 1.0350.

If the euro rises above 1.0470, it could gain momentum, and extend the move higher to 1.0490, alleviating the bearish pressure. At 1.0520, awaits the 20-day Simple Moving Average.

Technical levels