EUR/USD resumes the upside and targets 1.0900

• EUR/USD picks up pace and retargets the 1.0900 barrier.
• Advanced German Q4 GDP Growth Rate next on tap.
• US Dallas Fed index, short-term auctions come later in the NA session.

The European currency starts the new trading week on the positive foot and lifts EUR/USD back to the vicinity of the key barrier at 1.0900 the figure on Monday.

EUR/USD remains focused on the FOMC, ECB events

EUR/USD reclaims ground lost and manages to regain the smile after two consecutive daily pullbacks, shifting its focus at the same time to the 1.0900 neighbourhood amidst the broad-based cautious stance ahead key events later in the week.

Indeed, the FOMC meets on Wednesday and a 25 bps rate hike is largely anticipated, while the ECB is predicted to raise its policy rate by half percentage point on Thursday.

Investors’ attention, in the meantime, should remain on the potential future moves by these two major central banks, where the sentiment among investors remain at the mercy of hawkish messages from the Fed/ECB policy makers, the likelihood of Fed’s pivot, improved growth prospects in the euro region and the resilience of the US economy.

In the domestic calendar, Germany’s advancedQ4 GDP Growth Rate is next on tap seconded by final Consumer Confidence and Economic Sentiment in the broader Euroland. In the US, the Dallas Fed Manufacturing Index will be the sole release on Monday.

What to look for around EUR

The sharp yearly rally in EUR/USD appears to have met an initial and decent barrier around the 1.0930 for the time being.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next steps from the ECB and the Federal Reserve at their upcoming gatherings in the next week.

Back to the euro area, recession concerns now appear to have dwindled, which at the same time remain an important driver sustaining the ongoing recovery in the single currency as well as the hawkish narrative from the ECB.

Key events in the euro area this week: Germany Flash Q4 GDP Growth Rate, EMU Final Consumer Confidence, Economic Sentiment (Monday) – Germany Retail Sales/Unemployment Rate/Flash Inflation Rate, EMU Flash Q4 GDP Growth Rate (Tuesday) – Germany, EMU Final Manufacturing PMI, EMU Flash Inflation Rate/Unemployment Rate (Wednesday) – Germany Balance of Trade, ECB Interest Rate Decision, ECB Lagarde (Thursday) - Germany, EMU Final Services PMI (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.17% at 1.0884 and faces the next resistance at 1.0929 (2023 high January 26) followed by 1.0936 (weekly high April 21 2022) and finally 1.1000 (round level). On the other hand, the breakdown of 1.0766 (weekly low January 17) would target 1.0608 (55-day SMA) en route to 1.0481 (monthly low January 6).