EUR/USD comes under pressure near 1.1300 ahead of ECB

After four consecutive daily advances, EUR/USD now comes under some downside pressure and revisits the 1.1300 neighbourhood on Thursday.

EUR/USD focuses on the ECB

EUR/USD gives away part of the recent strong rebound and slips back to the 1.1300 zone on the back of the tepid recovery in the US dollar.

The move higher in the greenback comes despite the continuation of the side-lined mood in US yields and the perception that the Fed might not be as aggressive as expected when it comes to hiking rates at the March event,

The single currency, in addition, remains vigilant on the imminent ECB gathering, where the potential timing of the eventual normalization of the bank’s monetary conditions, the balance sheet and the views on the persistent elevated inflation are all expected to be at the centre of the debate.

In the docket, Germany final Services PMI came at 52.2 and the same indicator came at 51.1 for the broader euro area. Still in Euroland, Producer Prices are due next while usual Claims are due seconded by the ISM Non-Manufacturing PMI.

What to look for around EUR

EUR/USD surpassed the 1.1300 barrier and recorded fresh tops on Wednesday, coming under some selling pressure afterwards. In the meantime, some cautious trade seems to prevail around the pair ahead of the key ECB event later in the session. In the meantime, the broad risk appetite trends and the recent selling mood in the dollar are expected to keep dictating the price action around the European currency for the time being. Moving forward, the outlook for the pair remains far from rosy despite the rebound, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.

Key events in the euro area this week: EMU, Germany Final January Services PMI, ECB Meeting (Thursday) – EMU Retail Sales (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is losing 0.08% at 1.1292 and faces the next up barrier at 1.1329 (weekly high Feb.2) seconded by 1.1369 (high Jan.20) and finally 1.1429 (100-day SMA). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).