EUR/USD comes under pressure and challenges 1.0300

EUR/USD appears consolidative near parity amidst risk-off mood

  • EUR/USD loses the grip and returns below 1.0300.
  • EMU Industrial Production expanded 2.4% YoY in June.
  • US flash Consumer Sentiment next of note in the docket.

The single currency loses some shine and forces EUR/USD to retreat to the sub-1.0300 region on at the end of the week.

EUR/USD weaker on USD-reovery

EUR/USD gives away part of the recent advance – including fresh multi-week peaks near 1.0370 recorded in the wake of the lower-than-expected US inflation figures (August 10) – on the back of some profit taking in the risk complex along with fresh demand for the greenback.

The move lower in spot comes amidst a mild rebound in the German 10y Bund yields vs. modest losses in their American peers, all against the backdrop of a downbeat mood in the risk complex.

In the docket, Industrial Production in the broader Euroland expanded 2.4% in the year to June, surpassing initial consensus.

Later in the NA session, all the attention is expected to be on the release of the preliminary prints for the U-Mich index for the current month, which gauges the Consumer Sentiment.

What to look for around EUR

EUR/USD recedes from recent 5-week tops near 1.0370, as the greenback looks bid and some investors cash up part of the recent gains in the risk-associated universe.

Price action around the European currency, in the meantime, is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.

On the negatives for the single currency emerges the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges and the incipient slowdown in some fundamentals.

Key events in the euro area this week: EMU Industrial Production (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of monetary conditions. Impact of the war in Ukraine on the region’s growth prospects and inflation.

EUR/USD levels to watch

So far, spot is losing 0.17% at 1.0301 and a break below 1.0096 (weekly low July 26) would target 1.0000 (psychological level) en route to 0.9952 (2022 low July 14). On the other hand, the next up barrier comes at 1.0368 (monthly high August 10) seconded by 1.0523 (100-day SMA) and finally 1.0615 (weekly high June 27).

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