EUR/USD regains the 1.0400 mark and above ahead of ECB data

The optimism around the European currency remains on the rise and now lifts EUR/USD back above the 1.0400 hurdle, or new multi-day highs.

EUR/USD up on weaker US Dollar, positive data

EUR/USD now advances for the third session in a row and flirts with the multi-month resistance line near 1.0450, just ahead of the November highs around 1.0480.

The combination of the weaker note in the Greenback - which was exacerbated following the release of the FOMC Minutes on Wednesday – and the inactivity in the US markets due to the Thanksgiving Day holiday all collaborates with the upbeat sentiment in the risk complex and underpins the upside bias in spot.

Also adding to the pair’s uptick, the German Business Climate tracked by the IFO Institute improved to 86.3 in November (from 84.5). Later in the session, the ECB will publish its Accounts of the last event seconded by speeches by Board members De Guindos, Schnabel and Enria.

What to look for around EUR

EUR/USD trades on a firm note and manages to break above the 1.0400 barrier, as the US Dollar remains offered and the appetite for the risk assets looks firmer.

In the meantime, the European currency is expected to closely follow Dollar dynamics, geopolitical concerns and the Fed-ECB divergence. In addition, markets repricing of a potential pivot in the Fed’s policy remains the exclusive driver of the pair’s price action for the time being.

Back to the euro area, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: Germany Final Q3 GDP Growth Rate, GfK Consumer Confidence (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.29% at 1.0425 and faces the next up barrier at 1.0481 (monthly high November 15) ahead of 1.0500 (round level) and finally 1.0614 (weekly high June 27). On the flip side, a breach of 1.0222 (weekly low November 21) would target 1.0026 (100-day SMA) en route to 0.9935 (low November 10).