EUR/USD CORRECTS LOWER AND BREACHES 1.0200 AHEAD OF GERMAN IFO

• EUR/USD adds to Friday’s losses and revisits 1.0180.
• German 10y Bund yields attempt a mild bounce on Monday.
• Germany’s Business Climate next of relevance in the docket.

The single currency remains on the defensive and drags EUR/USD to the 1.0180 region at the beginning of the week.

EUR/USD LOOKS TO DATA

EUR/USD so far recedes for the second session in a row following the better mood surrounding the greenback. Despite the daily retracement, the pair keeps the range bound theme well and sound around the 1.0200 region for the time being.

Monday’s offered stance in the euro comes in line with a mild attempt of rebound in the German 10y Bund yields, all following recent multi-week lows, and marginal losses in European stocks following the opening bell on Monday.

It is expected to be an interesting week for the pair, as the FOMC gathering is due on Wednesday seconded by the flash US Q2 GDP and the publication of the PCE figures towards the end of the week. Closer to home, German and EMU advanced inflation figures and preliminary Q2 GDP readings as well as the German labour market report will also keep investors entertained.

In addition, the German Business Climate gauged by the IFO Institute is due later in the morning.

What to look for around EUR

EUR/USD managed to put further distance from sub-parity levels seen earlier in the month and approached the 1.0300 neighbourhood during last week.

The pair now looks side-lined as market participants continue to gauge the latest ECB announcements and appear cautious ahead of the upcoming FOMC event 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 IFO Business Climate (Monday) – 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. Effervescence around Italian politics following Draghi’s exit. 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 down 0.14% at 1.0200 and faces immediate contention at 1.0129 (low July 22) seconded by 0.9952 (2022 low July 14) and finally 0.9859 (low December 2002). On the upside, a breakout of 1.0278 (weekly high July 21) would target 1.0452 (55-day SMA) en route to 1.0615 (weekly high June 27).