EUR/USD extends the decline and pierces 1.0700
|- The selling pressure around EUR/USD remains unchanged.
- German Industrial Production surprised to the downside.
- Chief Powell will take centre stage later in the NA session.
Sellers remain well in control of the sentiment in the global markets and now drag EUR/USD briefly to the sub-1.0700 region on Tuesday.
EUR/USD remains offered ahead of Powell
EUR/USD is down for the fourth session in a row and ephemerally probes the area below the 1.0700 support on Tuesday.
Further improvement in the sentiment surrounding the dollar, the resurgence of the risk aversion and increasing cautiousness ahead of Fed’s Powell (due later in the European evening) all keep the pair under extra downside pressure in the first half of the week and underpin the sharp rejection from 2023 peaks past 1.1030 recorded just four days ago.
Earlier in the session, the Industrial Production in Germany shrank more than expected 3.1% MoM in December, while the trade deficit in France widened more than forecast to €14.93B also in December.
In the US, Chair Powell’s interview at the Economic Club of Washington is expected to grab all the attention later in the NA trading hours. In the calendar, Balance of Trade results and Consumer Credit Change are due.
What to look for around EUR
The steep sell-off in EUR/USD post-US NFP remains unabated on Tuesday and drags the pair to briefly test multi-week lows in the sub-1.0700 zone.
In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB after the central bank delivered a 50 bps at its meeting last week.
Back to the euro area, recession concerns now appear to have dwindled, which at the same time remain an important driver sustaining the ongoing recovery in the single currency as well as the hawkish narrative from the ECB.
Key events in the euro area this week: Germany Flash Inflation Rate (Thursday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is retreating 0.08% at 1.0716 and the breakdown of 1.0697 (monthly low February 7) would target 1.0662 (55-day SMA) en route to 1.0481 (2023 low January 6). On the flip side, the next up barrier emerges at 1.1032 (2023 high February 2) followed by 1.1100 (round level) and finally 1.1184 (weekly low March 31 2022).
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