EUR/USD LOOKS OFFERED NEAR 1.1000, YIELDS TAKE A BREATHER

• EUR/USD fades Tuesday’s small advance and trades close to 1.1000.
• German 10y bund yields shed soe ground following recent tops.
• EMU Flash Consumer Confidence, Fed’s Powell next in the docket.

EUR/USD navigates a narrow range in the low-1.1000s amidst the resumption of the demand for the greenback on Wednesday.

EUR/USD LOOKS TO USD, YIELDS, UKRAINE

EUR/USD remains depressed and comes under renewed selling pressure against the backdrop of persistent geopolitical worries and firmer speculation that the Federal Reserve could now embark on a more aggressive tightening of its monetary conditions.

In addition, German 10y bund yields correct lower and retest the 0.48% area following recent fresh cycle highs. The knee-jerk in yields follows the same performance in the rest of the global cash markets.

In the domestic calendar, the European Commission (EC) will release the preliminary gauge of the Consumer Confidence in the region for the month of March. In the NA session, Chair Powell and San Francisco Fed M.Daly are due to speak along with releases of weekly Mortgage Applications and New Home Sales.

What to look for around EUR

EUR/USD comes under pressure and approaches the key support at the 1.1000 yardstick midweek. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer euro for the time being.

Key events in the euro area this week: EC Flash Consumer Confidence (Wednesday) – Germany, EMU Flash PMIs (Thursday) – Germany IFO Business Climate (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is retreating 0.11% at 1.1015 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1230 (55-day SMA) and finally 1.1277 (100-day SMA). On the other hand, a drop below 1.0960 (low March 22) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).