EUR/USD pulls back from highs near the 1.0500 barrier

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  • EUR/USD pares back some of the previous advance to the 1.0500 area.
  • The dollar tries to rebound from the lows of several months initially touched.
  • Lagarde points out that high inflation is holding back spending and production.

The tone is still weak for the US dollar and encourages the EUR/USD to maintain the bullish bias above the 1.0400 barrier.

EUR/USD holds firm on selling dollars

EUR/USD pares some of its earlier advance to the 1.0500 limits, the early-week reading, due to the so far lackluster dollar recovery, while yields hold unfinished performance on both sides of the Atlantic so far From Monday.

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Nothing scheduled on the euro agenda leaves all the attention on the speech of the president of the European Central Bank (ECB), Christine Lagarde, before the European Parliament. In fact, Lagarde points out that interest rates remain the exclusive tool to fight inflation and that fiscal policy must be considered and not add to inflationary pressures. Lagarde also said inflation risks remain to the upside, while she declined to comment on whether inflation has peaked.

On the United States agenda, the Dallas Fed manufacturing index will be published, before the speech of the president of the Federal Reserve of New York, John C. Williams.

What to keep in mind around the euro

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EUR/USD holds firm and manages to breach the 1.0400 barrier again on fresh US dollar weakness amid alternating risk appetite trends.

Meanwhile, the European currency is expected to closely follow the dynamics of the dollar, the impact of the energy crisis in the region and the divergence of policies between the Fed and the ECB. Furthermore, repricing by markets of a potential Fed policy pivot remains the sole driver of the pair’s price action for now.

Returning to the euro area, growing speculation about a possible recession in the bloc emerges as a major domestic headwind facing the euro in the near term.

technical levels

For now, the pair is gaining 0.48% at 1.0434 and faces the next upside barrier at 1.0496 (15 Nov monthly high) before 1.0500 (round level) and finally 1.0614 (June 27 weekly high). On the other hand, the break of 1.0222 (weekly low 21 Nov) would target 1.0032 (100 SMA) on the way to 0.9935 (low 10 Nov).

Source: Fx Street

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