- EUR/USD revisits the 1.1300 region on Monday.
- The dollar remains firm amid persistent risk aversion.
- US 10-year yields move defensively near 1.90%.
The common currency loses more ground and leads the pair EUR/USD to test support at the 1.1300 level during the European session on Monday.
EUR/USD focuses on geopolitics and risk aversion
The EUR/USD down for the second day in a row and further widens the rejection from last week’s highs near 1.1500, reached shortly after the release of US inflation figures for January.
What’s more, the focus remains on the short end of the yield curve in both the US and Germany as important drivers of the pair’s price action, particularly after the latest FOMC and ECB events. Meanwhile, German 10-year Bund yields continue to correct lower after recent highs, while widening the spread against US bonds..
There are no major economic data releases on either side of the Atlantic, though ECB President Christine Lagarde’s speech later in the day should attract some attention from investors.
What to expect around the EUR
EUR/USD failed to sustain the post-US CPI rally near the 1.1500 barrier, prompting a corrective move towards 1.1300 on the renewed strong bias towards the US dollar. Despite the current weakness in the pair, the improving outlook appears to be underpinned by further speculation of a possible ECB interest rate hike sometime later in the year, higher German yields, persistently high inflation and a decent pace in economic activity and other key fundamentals in the eurozone.
EUR/USD levels
At time of writing, the EUR/USD is down 0.27% on the day, trading at 1.1314. The next resistance is found at 1.1491 (200-week SMA), followed by 1.1494 (10 Feb high) and finally 1.1656 (200-day SMA). On the other hand, a break below 1.1303 (14 Feb low), would target 1.1186 (24 Nov 2021 low) on the way to 1.1121 (28 Jan low).
Source: Fx Street
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