EUR/USD leaps to daily highs past 1.1610, looks to US data

EUR/USD manages to reverse the initial weakness and advances to session tops in the 1.1610/15 band on turnaround Tuesday.

EUR/USD looks to US data, risk trends

EUR/USD bounces off weekly lows near 1.1590 and looks to reverse the pessimism seen at the beginning of the week, all against the backdrop of unclear risk appetite trends and higher US yields.

Indeed, US yields in the belly of the curve regain some traction and flirt with the 1.64% area as opposed by the poor performance of yields in the German 10y Bunds, which recede to the -0.12% area so far on Tuesday.

While the greenback loses ground vs. rivals like the sterling, the yen and the Aussie dollar, it so far manages well to keep daily gains vs. the single currency.

Tuesday’s empty docket in the euro area will likely shift the attention to the participation of ECB Board member A.Enria in a panel discussion later in the European afternoon. The US calendar looks quite interesting following the releases of house prices tracked by the FHFA Index and the S&P/Case-Shiller Index seconded by New Home Sales and the October Consumer Confidence measured by the Conference Board.

What to look for around EUR

The bull run in EUR/USD still remains capped by the 1.1670 region (October 19). While the improvement in the sentiment surrounding the risk complex lent extra wings to the par in past sessions, price action is expected to keep looking to dollar dynamics for the time being, where tapering chatter remains well in centre stage. In the meantime, the idea that elevated inflation could last longer coupled with the loss of momentum in the economic recovery in the region, as per some weakness observed in key fundamentals, are seen pouring cold water over investors’ optimism as well as bullish attempts in the European currency.

Key events in the euro area this week: German GfK Consumer Confidence (Wednesday) – German labour market report, EMU final Consumer Confidence, ECB meeting, German flash CPI (Thursday) – Advanced German Q3 GDP, flash EMU CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Probable political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is gaining 0.02% at 1.1609 and faces the next up barrier at 1.1669 (monthly high Oct.19) followed by 1.1704 (55-day SMA) and finally 1.1755 (weekly high Sep.22). On the other hand, a break below 1.1590 (weekly low Oct.25) would target 1.1571 (low Oct.18) en route to 1.1524 (2021 low Oct.12).