- EURUSD extends the move higher just above parity.
- The dollar remains on the defensive amidst mixed US yields.
- EMU’s Sentix index improved to -30.9 in November.
The buying interest around the European currency remains well and sound and motivates EURUSD to revisit the parity zone at the beginning of the week.
EURUSD stronger on USD-selling
EURUSD advances for the second session in a row and gains more than two cents since last week’s lows around 0.9730, always against the backdrop of the persistent sell-off in the greenback.
Indeed, the dollar remains offered as market participants continue to gauge the mixed results from Friday’s US Payrolls as well as recent Fedspeak leaning towards an impasse in the Fed’s normalization process.
The continuation of the move higher in the pair so far comes in line with the mixed performance in US yields and some loss of momentum in the German 10-year bund yields after two daily advances in a row.
Earlier in the session, Germany’s Construction PMI rose to 43.8 in October and the Investor Confidence in the euro area improved to -30.9 for the current month according to the Sentix Index.
What to look for around EUR
EURUSD extends Friday’s recovery and confronts the initial target at the parity region so far on Monday.
In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).
Furthermore, the increasing speculation of a potential recession in the region – which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.
Key events in the euro area this week: Eurogroup Meeting, Germany Construction PMI (Monday) – EMU Retail Sales (Tuesday) – Italy Industrial Production (Thursday) – Germany Final Inflation Rate (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.
EURUSD levels to watch
So far, the pair is gaining 0.41% at 0.9998 and faces the next resistance at 1.0045 (100-day SMA) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12). On the other hand, a breach of 0.9730 (monthly low November 3) would target 0.9704 (weekly low October 21) en route to 0.9631 (monthly low October 13).