- EUR/USD remains offered in the sub-1.1000 region.
- The dollar regains composure on inflation, risk-off trade.
- US Consumer Sentiment will be the sole release on Friday.
The European currency comes under extra selling pressure and drags EUR/USD back below the 1.1000 yardstick at the end of the week.
EUR/USD keeps looking to Ukraine for direction
EUR/USD loses ground for the second session in a row on Friday against the backdrop of the persistent demand for the greenback, as market participants continue to gauge the recent US inflation figures, while the pretty steady geopolitical context also lends support to the buck.
The German cash market, in the meantime, sees yields of the key 10y Bund trading a tad lower following Thursday’s multi-week high in levels past the 0.30% mark.
Further out, investors seem to have already left behind the hawkish tilt at the ECB event on Thursday and re-shift the focus to the Russia-Ukraine dispute, inflation and the upcoming Fed gathering.
Data wise in Germany, final figures showed the CPI rose 0.9% MoM and 5.1% YoY in February. Across the pond, all the attention will be on the preliminary US Consumer Sentiment print for the month of March.
What to look for around EUR
EUR/USD could not sustain the ECB-induced uptick to the area past 1.1100 the figure, sparking instead a corrective leg lower in tandem with the resurgence of the sentiment towards the US dollar. Price action around the European currency, in the meantime, is expected to remain dictated by the broad risk appetite trends in response to geopolitical developments. Looking at the longer term, 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, the decent pace of the economic recovery and auspicious results from key fundamentals in the region.
Key events in the euro area this week: Germany Final CPI.
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 conflict.
EUR/USD levels to watch
So far, spot is retreating 0.07% at 1.0975 and faces the next up barrier at 1.1121 (weekly high Mar.10) followed by 1.1167 (20-day SMA) and finally 1.1276 (55-day SMA). On the other hand, a drop below 1.0805 (2022 low Mar.7) would target 1.0766 (monthly low May 7 2020) en route to 1.0727 (monthly low Apr. 24 2020).