- EUR/USD keeps the optimism well and sound near 0.9870.
- EMU, Germany Economic Sentiment surprised to the upside.
- US Industrial Production expanded 0.4% MoM in September.
The buying interest in the single currency gathers extra impulse and lifts EUR/USD to the area of multi-session highs past 0.9870 on Tuesday.
EUR/USD stronger on USD-selling, risk appetite
EUR/USD remains well bid in the upper-0.9800s as the selling pressure around the greenback seems to have picked extra pace on Tuesday.
In addition, the prevailing risk-on mood continues to support the pair’s upside bias despite German yields now give away initial gains and return to the negative territory, adding to Monday’s decline.
Extra support for the European currency also came after the Economic Sentiment measured by the ZEW institute in Germany and the Euroland unexpectedly came in above estimates in October, reversing at the same time the previous downtrend.
In the US, Industrial Production expanded at a monthly 0.4% in September and 5.3% from a year earlier. Next in the calendar comes the NAHB Index, TIC flows and the speech by Minneapolis Fed N.Kashkari (2023 voter, dove).
What to look for around EUR
EUR/USD remains in recovery-mode and now set sails to the 0.9900 neighbourhood amidst faltering price action surrounding the dollar.
In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Following latest results from key economic indicators, the latter is expected to extend further amidst the ongoing resilience of the US economy.
Furthermore, the increasing speculation of a potential recession in the region – which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the sour sentiment around the euro
Key events in the euro area this week: EMU, Germany ZEW Economic Sentiment (Tuesday) – EMU Final Inflation Rate, European Council Meeting (Thursday) – European Council Meeting, EMU Flash Consumer Confidence (Friday).
Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.
EUR/USD levels to watch
So far, the pair is gaining 0.23% at 0.9860 and expects the next resistance at 0.9875 (weekly high October 18) followed by 0.9999 (monthly high October 4) and finally 1.0050 (weekly high September 20). On the other hand, a breach of 0.9631 (monthly low October 13) would target 0.9535 (2022 low September 28) en route to 0.9411 (weekly low June 17 2002).