EURUSD picks up some upside traction and revisits 1.0370
|- EURUSD alternates gains with losses near 1.0370.
- The dollar also appears side-lined amidst flat yields.
- ECB Lagarde reiterated that extra rate hikes are in store.
The absence of a clear direction prevails around the European currency and prompts EURUSD to gyrate around the 1.0370 region at the end of the week.
EURUSD bypasses Lagarde’s comments
EURUSD trades in an inconclusive fashion amidst the Greenback's equally vacillating price action and alternating risk appetite trends on Friday.
In what was the salient event in the euro area, the President of the European Central Bank (ECB), Christine Lagarde reiterated, during a speech at the European Banking Congress, that the central bank plans to hike rates further, adding that the risks of a recession have increased. In addition, she suggested that fiscal policy needs to be temporary and targeted.
In the German debt market, the 10-year bund yields add to Thursday’s uptick and flirt with the 2.10% region, in line with the upside bias seen in their US peers.
Absent releases in the euro area, the focus of attention should gyrate to the US docket, where the Conference Bureau Leading Index and Existing Home Sales will take centre stage along with the speech by Boston Fed President Susan Collins.
What to look for around EUR
EURUSD trades within a narrow range amidst the broad-based indecision in the global markets, always below the 1.0400 mark and with the 200-day Simple Moving Average (SMA) at 1.0411.
In the meantime, price action around the European currency is expected to closely follow the US Dollar's dynamics, geopolitical concerns and the Fed-ECB divergence. In addition, markets repricing of a potential pivot in the Fed’s policy has become the exclusive source of the sharp advance in the pair in recent sessions.
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 the main headwinds facing the euro in the short-term horizon.
Key events in the euro area this week: ECB's Lagarde (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.
EURUSD levels to watch
So far, the pair is gaining 0.10% at 1.0371 and faces the next hurdle at 1.0411 (200-day SMA) ahead of 1.0481 (monthly high November 15) and finally 1.0500 (round level). On the flip side, a breach of 1.0023 (100-day SMA) would target 0.9935 (low November 10) en route to 0.9730 (monthly low November 3).
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