EUR/USD bounces off 2021 lows, regains 1.1450

• EUR/USD loses further ground and visits YTD lows around 1.1430.
• German 10y Bund yields look to extend the recent rebound.
• EMU Industrial Production, US U-Mich Index next in the docket.

There is no respite to the selling pressure around the single currency so far this week.

EUR/USD weaker, dollar rally remains unabated

EUR/USD loses ground for the third session in a row on Friday, as the rally in the greenback shows no signs of exhaustion for the time being.

Indeed, spot extends the breakdown of the 1.1500 mark and reaches new YTD lows in levels last seen in July 2020 around 1.1430, always on the back of the intense move higher in the buck.

It is worth recalling that the sentiment around the greenback improved markedly after the release of US inflation figures for the month of October (Wednesday), pushing yields higher and bringing forward a potential interest rate hike by the Fed.

Data wise in Euroland, Industrial Production in the euro bloc comes next along with the speech by ECB Board member P.Lane. Across the pond, the flash Consumer Sentiment will take centre stage.

What to look for around EUR

EUR/USD recorded new lows near 1.1430 and remains mired in the negative territory amidst an increasingly deteriorating outlook. As usual, the pair’s price action is predicted to mainly track the dynamics around the dollar, while bouts of occasional strength are seen coming from the broad risk appetite trends. On the more macro view, the loss of momentum in the economic recovery in the region - as per some weakness observed in key fundamentals – coupled with rising cases of COVID-19 is also seen pouring cold water over investors’ optimism and tempering bullish attempts in the shared currency. Further out, the euro should remain under scrutiny amidst the implicit debate between investors’ expectations of a probable lift-off sooner than anticipated and the ECB’s so far steady hand, all amidst the persevering elevated inflation in the bloc and rising conviction that it could extend further than previously estimated.

Key events in the euro area this week: EMU Industrial Production (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is down 0.01% at 1.1448 and faces the next up barrier at 1.1583 (20-day SMA) followed by 1.1609 (weekly high November 9) and finally 1.1616 (monthly high Nov.4). On the other hand, a break below 1.1436 (2021 low Nov.12) would target 1.1422 (monthly high Jun.10 2020) en route to 1.1300 (round level).