- EUR/USD gives away part of the recent 3-day advance.
- The Greenback regains some traction and weighs on the pair.
- US Consumer Confidence will be in the limelight later in the day.
Fresh selling pressure now drags EUR/USD to the low-1.1000s on the back of some tepid recovery in the dollar on Tuesday.
EUR/USD continues to target the 2023 high
EUR/USD now succumbs to the better mood around the dollar and snaps three consecutive sessions with gains on Tuesday.
Despite the knee-jerk, the pair remains poised for the continuation of the uptrend in the short-term horizon. Indeed, this view remains underpinned by firmer speculation that the ECB will raise the policy rate in June and July, which in turn appears propped up by the unabated hawkish narrative from ECB’s rate setters.
The absence of data releases in the euro docket on Tuesday will surely leave the attention to the US calendar, where the Consumer Confidence tracked by the Conference Board will be in the centre of the debate seconded by New Home Sales, and the FHFA’s House Price Index.
What to look for around EUR
Renewed weakness now prompts EUR/USD to retreat from recent peaks in response to some signs of life from the greenback.
Meanwhile, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.
Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.
Key events in the euro area this week: Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro group Meeting, Germany labour market report/ Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (Friday).
Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.
EUR/USD levels to watch
So far, the pair is losing 0.16% at 1.1027 and faces the next support at 1.0909 (weekly low April 17) seconded by 1.0831 (monthly low April 10) and finally 1.0788 (monthly low April 3). On the upside, a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022).