- EUR/USD remains bullish above 0.9700.
- The 10-year German bund yield hovers around 2.35% on Tuesday.
- Italian Industrial Production surprised to the upside in August.
Buyers appear to be in control of sentiment around the European currency and help the EUR/USD to hold above the key 0.9700 barrier on Tuesday.
EUR/USD looks to be on offer as USD sells off
The dollar’s downward correction allows EUR/USD to finally halt the recent sharp sell-off and rebound from previous lows in the 0.9670/65 area to the 0.9740 area, where some initial resistance has appeared.
Nothing new around the pair, save for the recent spike in risk aversion in response to renewed geopolitical concerns stemming from the war in Ukraine, which ultimately lay behind persistent dollar strength combined with expectations of a big rise in rates by the Fed at the November meeting.
Cash also adds a marginal advance in German 10-year bund yields against the correction in US yields across the curve.
In the national calendar, the Italian Industrial Production grew by 2.3% mom in August and 2.9% compared to the previous year. Turning to US data, the NFIB Business Optimism Index rose to 92.1 in September and the IBD/TIPP Economic Optimism Gauge is due out later, along with speeches from the FOMC’s Harker and Mester.
What should be taken into account around the euro?
The EUR/USD downside appears to have found some initial containment at the 0.9670/65 area so far this week.
Meanwhile, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the divergence between the Fed and the ECB. Following the latest results from key economic indicators, the latter is expected to spread further amid the ongoing resilience of the US economy.
In addition, growing speculation about a possible recession in the region – which seems to be underpinned by the decline in sentiment indicators, as well as the incipient slowdown in some fundamental variables – adds to the sour sentiment around the euro.
Technical levels
So far the pair is gaining 0.12% at 0.9709 and breaking above 0.9999 (weekly high Oct 4) would target 1.0050 (weekly high Sep 20) on the way to 1.0197 (monthly high Sep 12 ). On the other hand, there is immediate support at 0.9535 (28 Sep low), ahead of 0.9411 (weekly low Jun 17, 2002) and finally 0.9386 (weekly low Jun 10, 2002).
Source: Fx Street
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