- EUR/USD extends the downside to 1.1120 on Friday.
- German Q4 GDP expanded 1.4% YoY, contracted 0.7% QoQ.
- US PCE, Consumer Sentiment next of relevance in the NA session.
The single currency extends the weakness for yet another session and drags EUR/USD to fresh lows in the 1.1120 region at the end of the week.
EUR/USD remains weak post-FOMC
EUR/USD sheds ground for the fifth consecutive session on Friday, dropping to levels last traded in June 2020 in the 1.1130/20 band and always on the back of the intense rally in the greenback.
Indeed, the strong upside in the greenback remains bolstered by the firm sentiment sparked following the FOMC gathering on Wednesday, which lent extra wings to the buck and propelled the US Dollar Index to new cycle highs.
In the domestic calendar, the German economy expanded at an annualized 1.4% in the October-December period and contracted 0.7% inter-quarter, as per the release of the GDP figures. In addition, ECB’s M3 Money Supply expanded 6.9% in the year to December.
In the NA session, the inflation figures gauged by the PCE will take centre stage seconded by the final U-Mich Index and Personal Income/Spending.
What to look for around EUR
The selloff in EUR/USD remains unabated and the pair now approaches the 1.1100 level amidst the relentless march north in the dollar. Moving forward, dark clouds seem to be piling up when it comes to the outlook for the pair, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.
Key events in the euro area this week: Germany Advanced Q4 GDP, EMU Final Consumer Confidence (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April.
EUR/USD levels to watch
So far, spot is losing 0.10% at 1.1134 and faces the next up barrier at 1.1307 (55-day SMA) seconded by 1.1369 (high Jan.20) and finally 1.1450 (100-day SMA). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).
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