EUR/USD remains under pressure, bounces off fresh lows near 0.9550

After bottoming out in the 0.9550 region, EUR/USD now manages to regain some poise and reclaim the area above 0.9600 the figure at the beginning of the week.

EUR/USD remains under pressure on dollar strength

EUR/USD enters the third consecutive week with losses so far, bouncing off levels last seen in mid-June 2002 around 0.9550 against the backdrop of the persistent upside bias in the greenback.

On the latter, the buying interest in the dollar gathered extra steam in the wake of the latest FOMC event, where the Fed raised rates by 75 bps and Chief Powell maintained the hawkish rhetoric.

In the domestic calendar, Germany’s Business Climate tracked by the IFO Institute will take centre stage later in the European morning along with speeches by ECB’s De Guindos, Panetta and Chair Lagarde.

Across the Atlantic, the Chicago Fed National Activity Index and speeches by FOMC’s Collins, Bostic and Mester are also due.

What to look for around EUR

EUR/USD remains under heavy pressure against the backdrop of the unabated rally in the greenback. The pair dropped to levels last seen in June 2002 around 0.9550, leaving the door open to the continuation of this trend in the very near term at least.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The latter has been exacerbated further following the latest rate hike by the Fed and the persevering hawkish message from Powell and the rest of his rate-setters peers.

Furthermore, 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 – adds to the sour sentiment around the euro

Key events in the euro area this week: Germany IFO Business Climate, ECB Lagarde (Monday) – ECB Lagarde (Tuesday) – Germany GfK Consumer Confidence, ECB Lagarde (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Thursday) – EU Emergency Energy Meeting, Germany Retail Sales, France, Italy, EMU Flash Inflation Rate, Germany Unemployment Change, Unemployment Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian post-elections developments. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is retreating 0.45% at 0.9642 and a breach of 0.9552 (2022 low September 26) would target 0.9411 (weekly low June 17 2002) en route to 0.9386 (weekly low June 10 2002). On the upside, initial hurdle comes at 1.0050 (weekly high September 20) followed by 1.0197 (monthly high September 12) and finally 1.0272 (100-day SMA).