- EUR/USD approaches the area of recent lows near 1.1070.
- The dollar stays bid on persistent risk aversion.
- Germany final Services PMI came in at 55.8 in February.
The single currency remains mired in negative territory, motivating EUR/USD to navigate the lower bound of the range near 1.1170 on Thursday.
EUR/USD weaker on geopolitics, dollar strength
EUR/USD sheds ground for the fourth consecutive session and trades within shouting distance of the YTD lows in the mid-1.1000s so far on Thursday.
The relentless advance of Russian forces into Ukraine amidst the unabated escalation of the military conflict continues to sustain investors’ preference for the safe haven universe ahead of the start of another round of “peace” talks between both parties in Belarus later at midday European time.
The risk-off mood, in the meantime, is keeping the dollar well bid and demand for bonds firm, all motivating yields to ease following Wednesday’s bullish attempt.
On the domestic docket, final February Services PMI in Germany ticked higher to 55.6 and the EMU print improved to 55.5. In addition, the Unemployment Rate in the bloc drifter lower to 6.8%, bettering the consensus.
Across the pond, another testimony from Chief Powell will be in the limelight seconded by weekly Claims and Factory Orders.
What to look for around EUR
EUR/USD continues to look to geopolitics and risk appetite trends for direction. On this, the recent deterioration in the Russia-Ukraine conflict is expected to keep the pair under pressure amidst solid risk-off sentiment and demand for the dollar. In the meantime, bouts of strength in the pair should remain underpinned by speculation of a potential interest rate hike by the ECB probably sooner than many anticipate, higher German yields, persevering elevated inflation, a decent pace of the economic activity and auspicious results from key fundamentals in the region.
Key events in the euro area this week: Germany/EMU Services PMI, EMU Unemployment Rate, ECB Accounts (Thursday) – Germany Trade Balance, EMU Retail Sales (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine war.
EUR/USD levels to watch
So far, spot is losing 0.32% at 1.1083 and faces the next up barrier at 1.1313 (55-day SMA) followed by 1.1390 (weekly high Feb.21) and finally 1.1395 (weekly high Feb.16). On the other hand, a drop below 1.1057 (2022 low Mar 2) would target 1.1000 (round level) en route to 1.0870 (low May 25 2020).
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