EUR/USD falls below 1.0700 on EU recession fears and USD strength

• The EUR/USD pair is trading at 1.0696, down 0.20%, as negative sentiment surrounding the Eurozone economic outlook weighs on the Euro.
• Germany’s disappointing industrial production fuels recession fears and contributes to the decline of the Euro.
• ECB officials maintain a cautious approach, with de Guindos emphasizing reliance on data and Enria warning of the impact of rate hikes on property prices.

The pair EUR/USD extended its losses below 1.0700 late in the New York session, failing to extend its uptrend, which peaked around 1.0756, although sellers dragged prices towards current exchange rates. At the time of writing, the pair is trading at 1.0696, losing 0.20%.

German industrial data disappoints Euro, while ECB and Fed officials offer different policy perspectives

Wall Street is showing bullish sentiment in the markets, which would normally be detrimental to the US Dollar (USD), but not today. Germany’s Industrial Production figures, worse than expected, revived fears of recession in the Eurozone (EU). Consequently, the EUR/USD pair fell to two-day lows at 1.0664.

The Eurozone showed that the Producer Price Index (PPI) plummeted by -12.4%, less than the -12.5% ​​expected, suggesting that inflation continues to cool.

European Central Bank (ECB) officials folded their arms, and ECB Vice President Luis de Guindos adopted a watchful stance, stating that the central bank would continue to rely on data when it comes to monetary policy. Meanwhile, ECB Chief Supervisor Andrea Enria said: “The current higher interest rate environment could put further downward pressure on office and housing prices.”

Recently, the President of the Bundesbank and member of the ECB, Joachim Nagel, stated that it is “imperative to remain vigilant” on inflation, as he believes that the EU faces risks of inflation turning out to be “higher than expected.”

Federal Reserve officials continue to express diverse opinions. Minnesota Fed President Neil Kashkari said the strength of the economy raises questions about whether current policy is tight enough, and he said a pick-up in inflation would justify further tightening.

Separately, Chicago Fed President Austan Goolsbee acknowledged the progress being made in controlling inflation and suggested the conversation could turn to how long rates should remain at their current level.

EUR/USD Price Analysis: Technical Outlook

Following its two-day advance, EUR/USD experiences a pullback, with sellers failing to register a daily close below the latest cycle high at 1.0694, which could pave the way for a resumption of the uptrend. In that case, the first support for sellers would be the 50-day moving average (DMA) at 1.0632, with price action moving further away from the 200 DMA. Next would be 1.0600. On the opposite side, the first resistance for EUR/USD would be at 1.0700, with last Monday’s high at 1.0765. Once broken, the next stop would be the 200-DMA at 1.0805.