EUR/USD regains some balance and reclaims 1.0700

The single currency manages to shrug off part of Wednesday’s pullback and encourages EUR/USD to reclaim the area above the 1.0700 barrier on Thursday.

EUR/USD focuses on ECB, data

Despite the ongoing rebound, EUR/USD maintains unchanged the multi-session consolidative phase around the 1.0700 neighbourhood on the back of broader alternating risk appetite trends.

In fact, market participants – and the pair - continue to look at developments from both the ECB and the Federal Reserve when it comes to the potential next steps in the ongoing normalization process, as the key drivers for the price action for the time being.

Absent data releases in the euro area, the focus of attention is expected to be on the speeches by ECB’s Board members F.Panetta, L. De Guindos and P.Lane.

Across the pond, usual weekly Claims are due followed by Producer Prices, Building Permits, Housing Starts and the Philly Fed Manufacturing Index.

Additionally, Cleveland Fed L.Mester (2024 voter, hawk), St.Louis Fed J.Bullard (2025 voter, hawk) and FOMC Governor L.Cook (permanent voter, centrist) are all due to speak.

What to look for around EUR

Despite the recent rebound to the 1.0800 region, EUR/USD remains within the multi-day consolidative phase and decently supported near 1.0650 for the time being.

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.

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 0.17% at 1.0705 and the next up barrier aligns at 1.0804 (weekly high February 14) seconded by 1.1032 (2023 high February 2) and finally 1.1100 (round level). On the other hand, a drop below 1.0655 (weekly low February 13) would target 1.0481 (2023 low January 6) en route to 1.0325 (200-day SMA).