EUR/USD: Bears remain in control and target 1.0200
|- EUR/USD accelerates losses to the 1.0230/25 band on Monday.
- The Dollar gathers further traction and climbs to multi-day highs.
- Germany Producer Prices surprised to the downside in October.
The selling pressure keeps ruling the sentiment around the European currency and drags EUR/USD to fresh 2-week lows near 1.0220 on Monday.
EUR/USD weaker on USD-buying
EUR/USD extends the leg lower for the third session in a row and prints new multi-session lows at the same time, following another positive day for the US Dollar, which appears bid across the board and underpinned by higher US yields.
The late pick-up in the demand for the Greenback comes in response to recent hawkish Fedspeak as well as some scaling back of the possibility of a 50 bps rate hike at the Fed’s December gathering in favour of another 75 bps move.
In the Euro's calendar, German Producer Prices contracted at a monthly 4.2% in October and rose 34.5% from a year earlier. Across the pond, the only release of note will be the Chicago Fed National Activity Index.
What to look for around EUR
EUR/USD sees its downside exacerbated to the area of 2-week lows on the back of the resumption of the bid bias in the Greenback.
In the meantime, the European currency is expected to closely follow Dollar dynamics, geopolitical concerns and the Fed-ECB divergence. In addition, markets repricing of a potential pivot in the Fed’s policy remains the exclusive driver of the pair’s price action for the time being.
Back to the euro area, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – emerges as an important domestic headwind facing the Euro in the short-term horizon.
Key events for the Euro area this week: Flash EMU Consumer Confidence (Tuesday) EMU, Germany Advanced PMIs (Wednesday) – Germany IFO Business Climate, ECB Accounts (Thursday) – Germany Final Q3 GDP Growth Rate, GfK Consumer Confidence (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is retreating 0.82% at 1.0238 and a breach of 1.0021 (100-day SMA) would target 0.9935 (November 10 low) en route to 0.9730 (monthly low of November 3). On the other hand, the next hurdle emerges at 1.0406 (200-day SMA) ahead of 1.0481 (monthly high of November 15) and finally 1.0500 (round level).
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