- EUR/USD adds to Friday’s rebound and tests 1.0660.
- The dollar struggles to regain traction amidst declining US yields.
- EMU Sentix Index surprised to the downside in March.
EUR/USD advances modestly at the beginning of the week and manages to revisit the 1.0660 region.
EUR/USD up on dollar weakness
EUR/USD looks to extend Friday’s marked advance north of 1.0600 the figure on Monday amidst some indecision surrounding the greenback and the generalized downside pressure in US and German yields.
Indeed, renewed speculation around a potential pivot in the Fed’s tightening cycle appears to have removed some strength from the dollar in the last couple of sessions, morphing in turn to fresh oxygen for the risk complex.
In the domestic calendar, the Construction PMI in Germany improved to 48.6 in February, while the Investor Confidence in the broader Euroland measured by the Sentix Index unexpectedly worsened to -11.1 for the current month.
Later in the NA session, Factory Orders will be the only release of note seconded by short-term bill auctions.
What to look for around EUR
EUR/USD extends the ongoing recovery past the 1.0600 mark amidst the continuation of the selling mood around the dollar.
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 Construction PMI, EMU Sentix Index, Retail Sales (Monday) – Germany Retail Sales, EMU Advanced Q4 GDP Growth Rate, ECB Lagarde (Wednesday) – Germany Final Inflation Rate, ECB Lagarde (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 advancing 0.05% at 1.0638 and the breakout of 1.0715 (55-day SMA) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the other hand, there is an immediate support at 1.0532 (monthly low February 27) seconded by 1.0481 (2023 low January 6) and finally 1.0326 (200-day SMA).
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