EUR/USD picks up pace and retargets the 1.0900 region ahead of PMIs

Bulls remain in control of the sentiment around the European currency and motivates EUR/USD to flirt once again with the 1.0900 neighbourhood on Tuesday.

EUR/USD looks at data, risk trends

Following Monday’s marginal gains, EUR/USD picks up extra pace and extends further the march north to the proximity of the 1.0900 mark on turnaround Tuesday. So far, the pair navigates the third consecutive week with gains after shedding ground at the very beginning of the new year.

In the meantime, hawkish ECB-speak as of late helped maintaining the bullish price action in the pair, which gained more than 4 cents since monthly lows near 1.0480 recorded on January 6.

In the domestic calendar, Consumer Confidence in Germany tracked by GfK improved to -33.9 for the month of February. Later in the European morning, the advanced prints for the Manufacturing and Services PMIs in the euro area and the US economy will be in the limelight. In addition, Chair Lagarde and Board member af Jochnick are also due to speak.

What to look for around EUR

EUR/USD flirts once again with the 1.0900 neighbourhood following Monday’s climb to new 9-month peaks.

Price action around the European currency should continue to closely follow dollar dynamics, as well as the impact of the energy crisis on the euro bloc and the Fed-ECB divergence.

Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: Germany GfK Consumer Confidence, France Business Confidence, ECB Lagarde, EMU/France/Germany Advanced Manufacturing/Services PMIs (Tuesday) – Germany Ifo Business Climate (Wednesday) – Italy Business Confidence (Thursday) – France Consumer Confidence, 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 war in Ukraine and the protracted energy crisis on the bloc’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.26% at 1.0896 and faces the next up barrier at 1.0926 (2023 high January 23) followed by 1.0936 (weekly high April 21 2022) and finally 1.1000 (round level). On the flip side, the breakdown of 1.0766 (weekly low January 17) would target 1.0560 (55-day SMA) en route to 1.0481 (monthly low January 6).