EUR/USD appears offered below the 1.0700 mark ahead of data

Sellers seem in control of the sentiment around the European currency and drag EUR/USD back to the 1.0670/60 region on Tuesday.

EUR/USD now focuses on data releases, dollar

EUR/USD extends the pessimism seen at the beginning of the week and trades slightly on the defensive on Tuesday on the back of the mild recovery in the greenback, as US markets return to the usual activity following Monday’s holiday.

No news on the macro scenario for the pair, which keeps tracking developments/messages from both the European Central Bank (ECB) and the Federal Reserve when it comes to the next decisions on interest rates, particularly beyond the upcoming March events.

In the calendar, Germany’s flash Manufacturing PMI is expected at 46.5 in February (from 47.3) and the Services PMI is seen at 51.3 (from 50.7). Later in the session, advanced PMIs are also due for the broader euro area followed by the Economic Sentiment tracked by the ZEW Institute in Germany and the Euroland. Earlier in the session, New Car Registrations in the EU expanded 11.3% in the year to January.

In the US, advanced Manufacturing and Services PMIs are due followed by Existing Home Sales and a 3-month/6-month Bill Auctions.

What to look for around EUR

EUR/USD loses further traction amidst the tepid bounce in the greenback on Tuesday, while the release of key results from fundamentals on both sides of the ocean are expected to grab all the attention.

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: EMU New Car Registrations, EMU/Germany/France Advanced PMIs, Germany ZEW Economic Sentiment (Tuesday) – Germany Final Inflation Rate/IFO Business Climate, France Business Confidence (Wednesday) – EMU Final Inflation Rate (Thursday) – 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 0.13% at 1.0670 and a drop below 1.0612 (monthly low February 17) would target 1.0481 (2023 low January 6) en route to 1.0328 (200-day SMA). On the other hand, the next up barrier emerges at 1.0804 (weekly high February 14) seconded by 1.1032 (2023 high February 2) and finally 1.1100 (round level).