EUR/USD rebounds and heads back towards 1.0900

• EUR/USD is rebounding from Tuesday’s lows near 1.0860.
• German 10-year yield falls to 3-day lows.
• The German business climate improved in January.

The European currency now seeks to extend the rebound from previous lows in the 1.0860/55 zone against the dollar and raises the EUR/USD again near 1.0900 on Wednesday.

EUR/USD refocuses on the 1.0900 barrier

EUR/USD rises for the sixth straight session against a backdrop of alternating risk appetite trends, as investors – and global assets more broadly – remain cautious ahead of upcoming FOMC events and the ECB next week.

Additional support for the euro once again came from hawkish comments from ECB rate setters, this time Council members Makhlouf and Vasle, who advocated half-point rate hikes and favored stay in the restrictive territory for a while.

Also contributing to the optimism around the euro and reinforcing the view that Germany – and the Eurozone – could avoid a recession, the German Business Climate improved to 90.2 during the month of January.

On the other hand, MBA mortgage applications increased 7.0% in the week to January 20.

What to watch out for around the EUR

EUR/USD flirts again with the 1.0900 level after recent 9-month highs (Jan 23).

Meanwhile, the evolution of the prices of the European currency should closely follow the dynamics of the dollar, as well as the possible measures adopted by the ECB and the Federal Reserve.

Turning to the euro area, recessionary fears appear to have eased, which at the same time remain a major driver underpinning the ongoing recovery of the single currency.

technical levels

For now, the pair gained 0.12% at 1.0895 and faces the next upside barrier at 1.0926 (2023 high Jan 23), followed by 1.0936 (weekly high Apr 21, 2022) and finally 1.1000 (round level). On the flip side, the break of 1.0766 (weekly low Jan 17) would target 1.0576 (55-day SMA) en route to 1.0481 (monthly low Jan 6).