- EUR/USD reverses initial pullback to 1.0180.
- The ECB’s Kazaks favored a “significant” rise in September.
- The German business climate surprised to the downside in July.
The single currency regains its composure and makes the EUR/USD back to the upper end of the known range, near 1.0260, on Monday.
EUR/USD remains offered thanks to the sale of dollars
EUR/USD continues the swingy behavior from earlier in the week amid continued USD downward correction, sending the US Dollar Index (DXY) down for the third consecutive session.
The pair’s upbeat mood is also underpinned by comments from ECB Council member Kazaks, who appears to share the view of a 150 basis point rate hike for June, while advocating a “significant” rise in the september quote.
There was no reaction in the currency space after the German Business Climate as measured by the IFO Institute dropped to 88.6 in July. Furthermore, IFO officials said the German economy remains close to recession, a view fueled by high energy prices and possible gas shortages in the coming months. The same source added that companies see a further deterioration of the index in the coming months.
On the US calendar, the Chicago Fed National Activity Index was unchanged at -0.19 in June, while the Dallas Fed Manufacturing Index is due out later.
What to watch out for around the EUR?
EUR/USD managed to distance itself further from below-parity levels seen earlier in the month and approached the 1.0300 area last week.
Now the pair appears to be on the sidelines as market participants continue to assess the latest ECB announcements and remain cautious ahead of the upcoming FOMC event on Wednesday.
Meanwhile, the price action around the European currency closely follows growing speculation about a likely recession in the eurozone, dollar dynamics, geopolitical concerns, fragmentation fears and the divergence between the Fed and the ECB.
Technical levels
At the moment the pair is gaining 0.25% at 1.0239 and a break above 1.0278 (weekly high Jul 21) would target 1.0452 (55-day SMA) on the way to 1.0615 (weekly high Jun 27) . On the opposite side, immediate contention emerges at 1.0129 (22 Jul low), followed by 0.9952 (14 Jul low), and finally 0.9859 (Dec 2002 low).
Source: Fx Street
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