- EUR/USD comes under renewed downside pressure.
- The dollar starts the week on a positive foot above 107.00.
- Italian Retail Sales will be in the limelight later in the session.
The European currency comes under renewed and quite strong downside pressure and drags EUR/USD back to the vicinity of the 1.0100 region on Monday.
EUR/USD weaker on USD recovery
EUR/USD starts the week on the defensive and enters its third consecutive week with losses against the backdrop of the resumption of the strong upside momentum in the US dollar.
Indeed, further gains in the greenback come pari passu With expectations of the continuation of the Fed’s hiking cycle following another strong print from US Nonfarm Payrolls in June (+372K jobs). These results, at the same time, appear to have alleviated the effervescence around a potential “hard landing” of the US economy.
In the German money market, the 10y Bund yields grind a tad lower on Monday, in line with the performance of the US bond market.
In the docket, the only release of note in the old continent will be the Italian Retail Sales for the month of May. Across the pond, a couple of short-term Bill Auctions are due along with the speech by NY Fed J.Williams.
What to look for around EUR
Bears maintain the EUR/USD under heavy pressure and the acceleration of the downside opens the door to a probable visit to the parity level sooner rather than later.
In the meantime, the price action around the single currency continues to follow 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, EMU ZEW Economic Sentiment (Tuesday) – Germany Final Inflation Rate, EMU Industrial Production (Wednesday) – EMU Balance of Trade (Friday).
Eminent issues on the back boiler: Fragmentation risks. Kickstart of the ECB hiking cycle in July? Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects and inflation.
EUR/USD levels to watch
So far, spot is down 0.76% at 1.0108 and faces the next contention at 1.0071 (2022 low July 8) seconded by 1.0060 (low December 11 2002) and finally 1.0000 (psychological level). On the upside, a breakout of 1.0528 (55-day SMA) would target 1.0615 (weekly high June 27) en route to 1.0773 (monthly high June 9).