EUR/USD remains bid and near the 1.0750 region
|- EUR/USD looks to consolidate further the breakout of 1.0700.
- The dollar trades in an inconclusive fashion so far on Tuesday.
- Investors’ focus gyrates to Chief Powell’s speech later in the session.
The optimism around the European currency remains well and sound for yet another session and helps EUR/USD revisit the 1.0750 region on turnaround Tuesday.
EUR/USD: Next target emerges at 1.0800
EUR/USD advances for the third session in a row and keeps the bid bias unchanged in the first half of the week so far. Indeed, the pair has already gained more than 2 cents since last Friday’s lows in the sub-1.0500 region.
In the meantime, spot continues to derive further upside traction from the persistent lack of buying interest around the dollar, which remains under pressure amidst investors’ repricing of a potential pivot in the Fed’s monetary stance sooner than previously estimated.
In the domestic calendar, Industrial Production in France expanded at a monthly 0.2% in November in what was the sole release on this side of the Atlantic. Across the pond, the NFIB Business Optimism Index is due in the first turn seconded by the IBD/TIPP Economic Optimism Index and monthly figures of Wholesale Inventories.
In addition, Fed’s Powell will speak at an event on “Central Bank Independence” organized by the Riksbank in Sweden.
What to look for around EUR
EUR/USD has embarked on a strong recovery and has already retaken the key barrier at 1.0700 the figure and beyond.
In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region and the Fed-ECB divergence.
Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon.
Key events in the euro area this week: France Industrial Production (Tuesday) – France final Inflation Rate, Germany Full Year GDP Growth, MEU Balance of Trade/Industrial Production (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 protracted energy crisis 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 0.07% at 1.0734 and faces the next resistance level at 1.0760 (monthly high January 9) followed by 1.0773 (monthly high June 27) and finally 1.0786 (monthly high May 30 2022). On the downside, the breach of 1.0496 (monthly low January 6) would target 1.0443 (weekly low December 7) en route to 1.0398 (55-day SMA).
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