EUR/USD looks firm and approaches 1.1300, EMU CPI in sight
- EUR/USD extends the upside to the boundaries of 1.1300.
- Final January EMU CPI next of note in the domestic calendar.
- US ADP report will be the salient event later in the NA session.
The upside momentum around the shared currency remains everything but abated and now lifts EUR/USD to fresh multi-day highs near 1.1300 the figure on Wednesday.
EUR/USD strong on USD selling
EUR/USD advances uninterruptedly since Friday on the back of now deep correction in the US dollar, recovering at the same time nearly half of the selloff witnessed in the second half of January.
As mentioned, the greenback continues to lose ground on the back of the moderate improvement in the risk appetite trends, lower US yields and the perception of a less aggressive start of the Fed’s lift-off, as per recent comments from some Fed speakers.
The strong rebound in spot comes along the bounce in yields of the German 10y Bund reference to the positive territory on a more convincing note, as they managed to flirt with the 0.05% level for the first time since April 2019 on Tuesday.
In the docket, the focus of attention will be on the release of the final inflation figures in the broader Euroland for the month of January. In the US data sphere, the job creation by the US private sector tracked by the ADP report will be the salient event later on Wednesday.
What to look for around EUR
EUR/USD extended the bounce off 1.1120 (January 28) and now re-targets the 1.1300 barrier amidst improved risk appetite trends and the renewed selling mood in the dollar. Moving forward, the outlook for the pair remains far from rosy despite the rebound, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.
Key events in the euro area this week: EMU Flash January CPI (Wednesday) – EMU, Germany Final January Services PMI, ECB Meeting (Thursday) – EMU Retail Sales (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.
EUR/USD levels to watch
So far, spot is gaining 0.13% at 1.1285 and faces the next up barrier at 1.1294 (weekly high Feb.2) seconded by 1.1304 (55-day SMA) and finally 1.1369 (high Jan.20). On the other hand, a break below 1.1121 (2022 low Jan.28) would target 1.1100 (round level) en route to 1.1000 (psychological level).