EUR/USD Remains Offered Above 1.0700 Ahead Of Data

After two consecutive daily advances – including a brief test of the area beyond 1.0800 the figure on Tuesday – EUR/USD now faces some loss of momentum and recedes to the 1.0700 zone, where decent contention seems to have turned up.

For now, the dollar has regained some composure following the heightened volatility in the wake of the publication of the US inflation figures on Tuesday. Furthermore, the pair keeps the multi-session consolidative theme in the lower end of the recent range unchanged as investors continue to closely monitor messages from both the ECB and the Fed policymakers.

In the domestic calendar, EMU Balance of Trade figures are due seconded by Industrial Production and the speech by Chairwoman C. Lagarde at the European Parliament. Busy day across the pond, as Retail Sales, MBA Mortgage Applications, Industrial Production, the NAHB Index, Business Inventories, the NY Empire State Index, and TIC Flows are all scheduled for later in the NA session.

Despite the recent rebound to the 1.0800 region, EUR/USD remains within the multi-day consolidative phase and is decently supported near 1.0650 for the time being. In the meantime, price action around the European currency should continue to closely follow dollar dynamics and the potential next moves from the ECB after the bank has already anticipated another 50 bps rate raise at the March event.

Recession concerns now appear to have dwindled back to the euro area, which at the same time remains an important driver sustaining the ongoing recovery in the single currency and the hawkish narrative from the ECB.

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

So far, the pair is retreating 0.09% at 1.0727, and a drop below 1.0655 (weekly low February 13) would target 1.0481 (2023 quiet January 6) en route to 1.0324 (200-day SMA). On the flip side, the next-up barrier aligns at 1.0804 (weekly high February 14), seconded by 1.1032 (2023 high February 2), and finally 1.1100 (ground level).

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