EUR/USD advances to 6-day highs above 1.1740

• EUR/USD continues to push higher in the American session.
• US Dollar Index falls sharply, tests 93.00 on Monday.
• S&P 500 Index reaches new all-time high as risk flows dominate markets.

After posting its lowest weekly close of 2021 at 1.1696 on Friday, the EUR/USD pair reversed its direction on Monday and was last seen gaining 0.4% on the day at 1.1742.

The heavy selling pressure surrounding the greenback seems to be the primary driver behind EUR/USD's rebound at the start of the week. With risk flows starting to dominate the financial markets, the USD struggled to find demand and the US Dollar Index was last seen testing 93.00, losing 0.4% on a daily basis.

Reflecting the upbeat market mood, the S&P 500 Index, which lost 0.6% last week, is now trading at a new record-high of 4,486 with a daily gain of 1%.

Meanwhile, the data from the US revealed that Markit Manufacturing PMI and Markit Services PMI both came in lower than analysts' estimates in August's flash estimate. Nevertheless, these prints had little to no impact on risk perception.

On the other hand, the European Commission reported that the Consumer Confidence Indicator in the euro area declined to -5.3 from -4.4, compared to the market expectation of -5.

EUR/USD near-term outlook

Economists at Société Générale think that EUR/USD would need to break above 1.1810 in order to extend its rebound. 

"EUR/USD has embarked on a rebound after hitting 1.1660 last week. The bounce could persist towards a multi-month descending trend line at 1.1810. This hurdle must be reclaimed for an extended up-move," economists said. "The ECB will publish the minutes of the July meeting on Thursday, but the bar is low to alter market perceptions. Villeroy may repeat that it is too soon to discuss reducing PEPP bond purchases, which could check the potential upside of a corrective bounce in EUR/USD.” 

Technical levels to watch for