EUR/USD looks firm and nears 1.1300, EMU CPI in sight
- EUR/USD extends the rise to the limits of 1.1300.
- January’s final EMU CPI is the next item to note on the national calendar.
- The US ADP report will be the highlight later in the NA session.
The bullish momentum around the common currency remains anything but muted and is now picking up EUR/USD to new multi-day highs near 1.1300 Wednesday’s figure.
EUR/USD strong on selling USD
EUR/USD has been rising steadily since Friday against the backdrop of the now deep correction in the US Dollar, while recovering nearly half of the selloff seen in the second half of January.
As mentioned, the greenback continues to lose ground on moderately improving risk appetite trends, lower US yields and the perception of a less aggressive start to the Fed’s takeoff. according to recent comments from some Fed stakeholders.
Along with the strong rebound in spot, benchmark German 10-year Bund yields bounced back into positive territory on a more convincing note, as they managed to flirt with the 0.05% level for the first time since April 2019 Tuesday.
On the program, attention will be paid to the publication of the final inflation figures for the whole of Euroland for the month of January. In the US data sphere, US private sector job creation tracked by the ADP report will be the highlight later on Wednesday.
What to look for around the EUR
EUR/USD extended the rebound from 1.1120 (Jan 28) and is now re-targeting the 1.1300 barrier amid improving risk appetite trends and renewed selling mood of the dollar. Looking ahead, the outlook for the pair remains far from rosy despite the rebound, especially in light of the imminent start of the Fed’s tightening cycle against the ECB’s longer-term dovish stance, despite high inflation in the euro zone. giving no idea of cooling yet. On another front, the uninterrupted progression of the coronavirus pandemic remains the only factor to consider when it comes to economic growth prospects and investor sentiment in the region.
Main events in the euro zone this week: EMU Flash January CPI (Wednesday) – EMU, Germany Final January Services PMI, BCE Meeting (Thursday) – EMU Retail Sales (Friday).
Significant problems on the rear boiler: Asymmetric Post-Pandemic Economic Recovery in the Eurozone. Potential position/reaction of the ECB to the persistence of high inflation in the region. Speculative trajectory/declining rates of the ECB. Italy elects the President of the Republic at the end of January. Presidential elections in France in April. Geopolitical concerns of the Russian-Ukrainian conflict.
EUR/USD levels to watch
So far the spot gains 0.13% to 1.1285 and faces the next upside barrier at 1.1294 (Feb 2nd weekly high) followed by 1.1304 (55-day MMS) and finally 1.1369 (high from Jan 20). On the other hand, a break below 1.1121 (28th Jan 2022 low) would target 1.1100 (round level) en route to 1.1000 (psychological level).