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EUR/USD adds to recent gains and retargets 1.0900, FOMC eyed

  • EUR/USD adds to Tuesday’s advance and approaches 1.0900.
  • EMU Flash inflation Rate, Unemployment Rate next of note in the bloc.
  • The FOMC event, ISM Manufacturing take centre stage later in the session.

The European currency keeps the optimism unchanged for the second session in a row and lifts EUR/USD back to the vicinity of the 1.0900 hurdle on Wednesday.

EUR/USD looks at EMU data, FOMC decision

EUR/USD advances for the second straight session midweek on the back of the renewed offered stance in the greenback and ahead of key releases on both sides of the ocean as well as the key FOMC event due later in the European evening.

The recent knee-jerk in the dollar came in response to disappointing results from the US labour market in Q4 2022 which at the same time reinforced the idea of a Fed’s pivot that could emerge in the near term.

Closer to home, dwindling concerns around a potential recession in the region continues to bolster the recent upside bias in the single currency, although the persistent elevated inflation could prompt the ECB to keep its tightening cycle unaltered for the time being. on this, the ECB meets on Thursday and is expected to hike rates by half percentage point.

Back to the domestic calendar, advanced EMU Q4 GDP Growth Rate is due later seconded by the Unemployment Rate in the region. In addition, final Manufacturig PMIs are also scheduled.

Across the pond, MBA Mortgage Applications, the ISM Manufacturing, JOLTs Job Openings, the ADP report, final Manufacturing PMOI and Construction Spending are also due.

What to look for around EUR

The acute comeback allows EUR/USD to flirt once again with the key 1.0900 neighbourhood ahead of the FOMC gathering and the ECB event.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next steps from the ECB and the Federal Reserve at their upcoming gatherings in the next 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 Retail Sales/Unemployment Rate/Flash Inflation Rate, EMU Flash Q4 GDP Growth Rate (Tuesday) – Germany, EMU Final Manufacturing PMI, EMU Flash Inflation Rate/Unemployment Rate (Wednesday) – Germany Balance of Trade, ECB Interest Rate Decision, ECB Lagarde (Thursday) - Germany, EMU Final Services PMI (Friday).

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 gaining 0.22% at 1.0884 and faces the next up barrier at 1.0929 (2023 high January 26) followed by 1.0936 (weekly high April 21 2022) and finally 1.1000 (round level). On the other hand, the breakdown of 1.0802 (weekly low January 31) would target 1.0766 (weekly low January 17) en route to 1.0625 (55-day SMA).

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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