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EUR/USD sinks to 6-week lows near 1.0630, dollar remains strong

  • EUR/USD drops to multi-week lows in the 1.0630/25 band.
  • The dollar remains strong well north of the 104.00 barrier.
  • CB Leading Index and Fed’s Barking come next in the US docket.

The bearish sentiment remains well and sound around the European currency and motivates EUR/USD to slip back to the 1.0630 region for the first time since early January.

EUR/USD remains weak on USD recovery

EUR/USD loses ground for the third session in a row at the end of the week amidst the so far unabated recovery in the greenback, which motivates the USD Index (DXY) to extend the recent breakout of the 104.00 barrier.

The pair saw its losses accelerate in past hours in response to the persistent hawkish narrative from Fed speakers – this time Mester and Bullard – while the firmer-than-expected results from the US docket also added to the renewed strength in the buck.

Data wise in the Euroland, Producer Prices in Germany contracted at a monthly 1.0% in January and rose 17.8% over the last twelve months. In addition, France’s final figures saw the CPI rise 0.4% MoM in January and 6.0% vs. the same month of 2022. Later in the session, EMU’s Current Account results are also due.

In the US, the CB Leading Index will be the sole release seconded by the speech by Richmond Fed T.Barkin.

What to look for around EUR

EUR/USD appears well on the offered side and probes the area of multi-week lows near 1.0630 at the end of the week.

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 retreating 0.29% at 1.0640 and a drop below 1.0629 (monthly low February 17) would target 1.0481 (2023 low January 6) en route to 1.0326 (200-day SMA). On the other hand, the next up barrier emerges at 1.0804 (weekly high February 14) seconded by 1.1032 (2023 high February 2) and finally 1.1100 (round level).

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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