EUR/USD: Bears meet support near 1.0130 ahead of ZEW data

  • EUR/USD drops and rebounds from the 1.0130 region.
  • Germany, EMU ZEW Economic Sentiment in due next.
  • Housing Starts, Building Permits, Industrial Production next on tap later.

The European currency remains under scrutiny in the first half of the week and motivates EUR/USD to hover around the 1.0150 region on Tuesday.

EUR/USD focuses on dollar, ZEW survey

EUR/USD loses ground fort the third session in a row and navigates multi-day lows around 1.0150 on the back of the continuation of the bid bias around the greenback and lack of traction in yields on both sides of the Atlantic.

Indeed, the pair comes under further downside pressure following the stronger dollar and investors’ preference for safer assets, which forced the pair to give away more than two cents since last week’s tops near 1.0370 (August 10).

In the domestic calendar, the Economic Sentiment tracked by the ZEW survey is due in both Germany and the broader Euroland. Across the pond, the housing sector will take centre stage along with Industrial/Manufacturing Production results.

What to look for around EUR

EUR/USD’s upside momentum met a decent hurdle around 1.0360/70, an area coincident with the 55-day SMA and the 6-month resistance line so far.

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 emerge 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, Germany ZEW Economic Sentiment, EMU Balance of Trade (Tuesday), EMU GDP Growth Rate (Wednesday) – EMU Final Inflation Rate (Thursday).

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 its 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 0.20% at 1.0137 and a break below 1.0096 (weekly low July 27) 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 1.0505 (100-day SMA) and finally 1.0615 (weekly high June 27).

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