- The selling pressure remains well and sound around EUR/USD.
- The Dollar trades in multi-session highs when tracked by the DXY.
- The Chicago Fed National Activity Index worsened in October.
Bears keep controlling the mood in the risk complex and keep EUR/USD depressed in the 1.0250 region at the beginning of the week.
EUR/USD drops to 2-week lows
EUR/USD maintains the corrective downside well in place for yet another session and threatens to challenge the key support around the 1.0200 neighbourhood sooner rather than later.
Indeed, in quite an uneventful session, the Greenback extends the recent bounce backed by the recent hawkish message from some Fed speakers, which lent renewed oxygen to both the buck and yields, while at the same time mitigated the optimism around a potential Fed pivot.
Earlier in the calendar, German Producer Prices contracted 4.2% MoM in October and rose 34.5% vs. the same month of 2021. In the US data space, the Chicago Fed National Activity Index dropped to -0.05 in October (from 0.17).
What to look for around EUR
EURUSD sees its downside exacerbated to the area of 2-week lows on the back of the resumption of the bid bias in the Greenback.
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 for the Euro area this week: Flash EMU Consumer Confidence (Tuesday) EMU, Germany Advanced PMIs (Wednesday) – Germany IFO Business Climate, ECB Accounts (Thursday) – 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 retreating 0.69% at 1.0251 and a breach of 1.0021 (100-day SMA) would target 0.9935 (low November 10) en route to 0.9730 (monthly low November 3). On the other hand, the next hurdle emerges at 1.0406 (200-day SMA) ahead of 1.0481 (monthly high November 15) and finally 1.0500 (round level).
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