EUR/USD appears offered below 1.0600 ahead of US data

Sellers remain well in control of the mood around the European currency and keep EUR/USD depressed in the 1.0590 region at the end of the week.

EUR/USD weaker ahead of US PCE, Fedspeak

EUR/USD retreats uninterruptedly since Monday and navigates the area of multi-week lows in the 1.0590/80 band on Friday amidst a mild but constant bid bias in the greenback and generalized prudence ahead of the release of key US data later in the session.

The persevering decline in the pair remains propped up by the better tone in the dollar, which in turn appears bolstered by speculation of the Fed’s tighter-for-longer stance and higher US yields.

In the domestic calendar, final GDP Growth Rate in Germany showed the economy expanded 0.9% YoY in the October-December 2020 period, while Consumer Confidence tracked by GfK “improved” to -30.5 for the month of March. In France, Consumer Confidence eased to 82 in February (from 83).

Across the ocean, the release of the Fed’s preferred inflation gauge – the PCE and Core PCE – will be the salient event seconded by Personal Income/Spending, New Home Sales and the final Michigan Consumer Sentiment print.

Additionally, FOMC Governor P.Jefferson (permanent voter, centrist) and Cleveland Fed L.Mester (2024 voter, hawk) are also due to speak.

What to look for around EUR

Price action around EUR/USD remains subdued and forces the pair to keep business in the lower end of the recent 6-weeks trading range.

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 bank has already anticipated another 50 bps rate raise at the March event.

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 Final Q4 GDP Growth Rate/GfK Consumer Confidence (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 retreating 0.08% at 1.0586 and a drop below 1.0577 (monthly low February 23) would target 1.0481 (2023 low January 6) en route to 1.0329 (200-day SMA). On the other hand, the next up barrier emerges at 1.0714 (55-day SMA) followed by 1.0804 (weekly high February 14) and finally 1.1032 (2023 high February 2).