- EUR/USD extends bearish note below 1.0600.
- Germany’s final GDP growth rate reached 0.9% year-on-year.
- Markets’ attention will be on US PCE, Fedspeak.
Sellers remain well in control of sentiment around the European currency and are holding onto it EUR/USD it fell in the 1.0590 region at the end of the week.
EUR/USD weaker ahead of US PCE, Fedspeak
EUR/USD has been trading lower since Monday and is hovering around multi-week lows in the 1.0590/80 range on Friday amid a slight but constant dollar supply bias and general caution ahead of the release of key US data later in the session.
The pair’s sustained decline remains underpinned by the dollar’s better tone, which in turn appears to be bolstered by speculation of a tighter, longer-term Fed stance and higher US yields.
Finals in the domestic calendar GDP Germany’s growth rate showed the economy grew by 0.9% year-on-year between October and December 2020, while consumer confidence tracked by GfK “improved” to -30.5 for the month of March. In France, consumer confidence fell to 82 (from 83) in February.
Across the ocean, the release of the Fed’s preferred gauge of inflation – PCE and Core PC – will be the highlight event accompanied by Personal Income/Expenditures, New Home Sales and the final Michigan Consumer Sentiment print.
In addition, FOMC Governor P. Jefferson (regular voter, centrist) and Cleveland Fed L. Mester (2024 voter, hawk) are also scheduled to speak.
What to look for around EUR
Price action around the EUR/USD remains muted, forcing the pair to hold trades at the lows of recent 6-week trades.
Meanwhile, price action around the European currency should continue to closely monitor the dollar’s momentum, as well as potential further moves from the ECB after the bank already expected another 50 basis point rate hike at its March meeting.
Back to the Eurozone, recession fears now appear to have abated, which at the same time remains an important engine supporting the single currency’s continued recovery, as well as a hawkish narrative from the ECB.
This week’s key events in the Eurozone: Germany Final Q4 GDP Growth Rate/GfK Consumer Confidence (Friday).
Eminent problems on the rear boiler: The ECB’s hiking cycle continues amid declining bets on a recession in the region and still elevated inflation. The impact of the Russo-Ukrainian war on growth prospects and inflation view in the area. Risks of entrenched inflation.
EUR/USD levels to watch
So far, the pair is retreating 0.08% to 1.0586 and a break below 1.0577 (monthly low on February 23) would target 1.0481 (2023 low on January 6) en route to 1.0329 (200-day SMA). On the downside, another upside barrier appears at 1.0714 (55-day SMA), followed by 1.0804 (weekly high of February 14) and finally 1.1032 (2023 high of February 2).
