- EUR/USD rapidly leaves behind monthly highs near 1.0760.
- Final February CPI in France surpassed the advanced prints.
- Risk aversion picks up pace on renewed concerns around banks.
The sharp resurgence of the risk aversion forced EUR/USD to quickly correct lower and trade at shouting distance from the key 1.0600 neighbourhood on Wednesday.
EUR/USD weaker on USD-buying
EUR/USD came under renewed and quite heavy selling pressure after negative news surrounding the Swiss lender Credit Suisse reignited the interest for the safe haven universe.
Against that, the demand for the greenback gathered renewed impulse and lifted the USD Index (DXY) to new highs north of the 104.00 barrier in a context where US and German yields resumed the downtrend.
Data wise in the region, final inflation figures in France came in a tad above the preliminary readings for the month of February and showed the CPI rising 1.0% MoM and 6.3% over the last twelve months. In the euro bloc, the Industrial Production expanded at a monthly 0.7% in January and 0.9% from a year earlier.
Across the ocean, all the attention will be on Producer Prices and Retail Sales seconded by MBA Mortgage Applications, the NY Empire State Manufacturing Index, Business Inventories, the NAHB Housing Market Index and TIC Flows.
What to look for around EUR
EUR/USD comes under intense downside pressure as concerns (this time) surrounding the European banking sector picked up pace and triggered a flight-to-safety mood among market participants.
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 past the March meeting, when the bank has already anticipated another 50 bps rate hike.
Key events in the euro area this week: EMU Industrial Production (Wednesday) – ECB Interest Rate decision, ECB Lagarde (Thursday) – EMU Final Inflation Rate (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 1.01% at 1.0626 and faces the next contention at 1.0555 (100-day SMA) seconded by 1.0524 (monthly low March 8) and finally 1.0481 (2023 low January 6). On the upside, the breakout of 1.0759 (monthly high March 15) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2).
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