- EUR/USD partially reclaims ground lost following Tuesday’s pullback.
- Germany GfK Consumer Confidence worsened to -30.6 in August.
- Investors expect the Fed to hike rates by 75 bps at its meeting on Wednesday.
Following Tuesday’s strong pullback, EUR/USD manages to regain composure and advance to the 1.0160 region on Wednesday.
EUR/USD appears supported around 1.0100
After bottoming out in the vicinity of the 1.0100 zone in the first half of the week, fresh buying interest seems to have re-emerged in EUR/USD amidst a corrective downside in the greenback.
The pair is seen under pressure in the next hours ahead of the key FOMC gathering due later in the NA session, where the Fed is predicted to keep normalizing its monetary conditions via a 75 bps rate hike.
In the domestic data space, Germany Consumer Confidence tracked by GfK deteriorated to -30.6 for the month of August. The Consumer Confidence in France followed suit after deflating to 80 in July (from 82).
Later in the session, Italy’s Consumer Confidence is due followed by releases in the US docket: MBA Mortgage Applications, flash Goods Trade Balance results, Durable Goods Orders and Pending Home Sales.
What to look for around EUR
EUR/USD regains the smile somewhat following Tuesday’s deep drop to the boundaries of the 1.0100 region.
The pair extends its range bound stance, as market participants continue to gauge the latest ECB announcements and appear cautious ahead of the upcoming FOMC event later on Wednesday.
In the meantime, the price action around the European currency closely follows increasing speculation of a probable recession in the euro area, dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.
Key events in the euro area this week: Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Thursday) – Germany Unemployment Change, Unemployment Rate, Flash Q2 GDP, EMU Flash Inflation Rate, Advanced Q2 GDP (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. Performance of the economic recovery post-pandemic in the region. Impact of the war in Ukraine on the region’s growth prospects and inflation.
EUR/USD levels to watch
So far, spot is gaining 0.27% at 1.0142 and a breakout of 1.0278 (weekly high July 21) would target 1.0438 (55-day SMA) en route to 1.0615 (weekly high June 27). On the other hand, initial contention emerges at 1.0107 (weekly low July 26) seconded by 1.0000 (psychological level) and finally 0.9952 (2022 low July 14).
