EUR/USD looks depressed around 1.1580, looks to data, dollar

The selling bias hits the single currency and forces EUR/USD to return to the sub-1.1600 area ahead the opening bell in Euroland on Thursday.

EUR/USD looks to USD, yields

Following a volatile session on Wednesday, EUR/USD managed to chart decent gains, although the absence of follow through motivate spot to slip back to the negative territory on Thursday.

The pair, in the meantime, stays under pressure on the back of the decent advance in the greenback, which motivates the US Dollar Index (DXY) to regain the 94.00 barrier and beyond amidst a mixed tone in US yields.

It is worth recalling that the greenback surrendered ground on Wednesday after the Federal Reserve announced it will start tapering its bond-purchase programme later in the month at a monthly $15B, matching the broad consensus. Later, in his press conference, Chief Powell gave an upbeat assessment of the economy although he emphasized that the start of the tapering process has no links to a rates lift-off.

Later in the domestic docket, German Factory Orders and the final October Services PMI are due. In the broader euro area, September’s Producer Prices and the Services PMI are also due.

Across the pond, the usual Initial Claims, Challenger Job Cuts and Balance of Trade figures are all scheduled for later in the NA session.

What to look for around EUR

EUR/USD’s upside remains so far capped by the inability of the pair to break above 1.1600 on a convincing fashion. In the meantime, spot continues to look to the risk appetite trends for direction as well as dollar dynamics, while the loss of momentum in the economic recovery in the region - as per some weakness observed in key fundamentals - is also seen pouring cold water over investors’ optimism and tempering bullish attempts in the European currency. Further out, the single currency should remain under scrutiny amidst the implicit debate between investors’ expectations of a probable lift-off sooner than anticipated and the ECB’s so far steady hand, all amidst the persevering elevated inflation in the region and prospects that it could extend further than previously estimated.

Key events in the euro area this week: Final Services PMIs (Thursday) – EMU Retail Sales (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is losing 0.24% at 1.1584 and faces the next up barrier at 1.1688 (55-day SMA) followed by 1.1692 (monthly high Oct.28) and finally 1.1755 (weekly high Sep.22). On the other hand, a break below 1.1535 (weekly low Oct.29) would target 1.1524 (2021 low Oct.12) en route to 1.1495 (monthly low Mar.9 2020).