EUR/USD bounces off multi-day lows around 1.0960, focus on ECB-speak

  • EUR/USD extends the leg lower to the 1.0960 region.
  • German bund 10y yields retest the 0.50% area on Tuesday.
  • ECB’s Lagarde, De Guindos, Panetta, Lane next on tap in the euro docket.

The selling bias in the European currency remains well and sound and drags EUR/USD to fresh multi-session lows around 1.0960 on turnaround Tuesday.

EUR/USD weaker post-Powell, looks to USD

EUR/USD remains on the defensive for the third straight session and retreats to the 1.0960 area in response to the intense march higher in the greenback, which in turn appears bolstered by Monday’s hawkish tilt from Powell’s message, higher yields and the absence of progress in the Russia-Ukraine peace dialogue.

The pair’s negative performance comes in contrast with the persevering move higher in German 10y benchmark yields, which revisit the 0.50% area for the first time since October 2018.

Now looking at the ECB, no news from VP De Guindos earlier in the session, who ruled out the possibility of stagflation in the region, in line with Lagarde’s comments at the beginning of the week.

Absent data releases in the euro area, investors’ attention would be on speeches by Chair Lagarde and Board members Panetta and Lane.

Across the pond, the Richmond Fed index is only due, while FOMC’s Williams, Daly and Mester are also due to speak later in the NA session.

What to look for around EUR

EUR/USD comes under further downside pressure and breaks below the key support at 1.1000 the figure in the first half of the week. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer euro for the time being.

Key events in the euro area this week: ECB Lagarde (Tuesday) – Germany, EMU Flash PMIs (Thursday) – Germany IFO Business Climate (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. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is retreating 0.11% at 1.1003 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1235 (55-day SMA) and finally 1.1283 (100-day SMA). On the other hand, a drop below 1.0960 (low March 22) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).

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