On Tuesday, the EUR/USD regained its upward trend and exceeded 1.0400. Near 106.00, the dollar plunges to fresh 3-month lows. Villeroy of the ECB paved the way for more adaptable rate increases.
As a result of the dollar’s sharp decline, EURUSD can reach new 4-month highs on Tuesday beyond 1.0400.
The EURUSD is now flirting with the crucial 200-day SMA, currently at 1.0430, as it gains further and revisits levels last traded in early July.
As investors continue to reprice a likely Fed policy shift in the near term, the pair navigates the second consecutive week with gains supported by the persistent weakness affecting the greenback.
Based near the ECB, board member Villeroy argued for a more flexible and gradual pace of rate increases in the future during early trading but also stated that large rate rises won’t establish a new pattern. He also appreciated last week’s US inflation data, which came in lower than forecast.
Another adjustment to the Q3 EMU GDP is scheduled for release, and this revision will be supported by both the ZEW Economic Sentiment in Germany and the euro area. Producer Prices will be the hot topic over there.
What to watch out for in the EUR
Following Monday’s glitch, the EURUSD recovered and broke over the important 1.0400 level, setting new multi-month highs.
Price movement around the euro is anticipated to closely track dollar trends, geopolitical tensions, and the Fed-ECB divergence in the interim. Additionally, the only driver of the recent sessions’ significant rise in the pair has been the market’s repricing of a likely Fed policy reversal.
Returning to the euro area, the key challenges the currency faces in the near term are the growing fears of a probable recession, which seem to be supported by falling mood indices and an impending slowdown in certain fundamentals.
This week’s major events in the eurozone include Germany, ZEW Economic Sentiment, and EMU Flash Q3 GDP. Tuesday’s ZEW Economic Sentiment, Wednesday’s ECB C. Lagarde Financial Stability Review, Thursday’s final EMU inflation rate, and Friday’s ECB C. Lagarde (Friday).
The continuation of the ECB’s rate hike cycle vs. rising recession concerns are important topics simmering in the background. Impact of the conflict in Ukraine and the ongoing energy shortage on the prognosis for inflation and growth in the area.
EURUSD levels to monitor
The pair is now up 0.76% at 1.0405 and will next encounter resistance at 1.0417 (the month’s high from November 15), followed by 1.0427 (the 200-day SMA), and lastly, 1.0614. (weekly high June 27). On the other side, a break of 1.0026 (the 100-day SMA) would lead to 0.9730 after aiming for 0.9935 (the low from November 10). (monthly low November 3).