EUR/USD regains the smile and retargets 0.9700

• EUR/USD gathers some upside traction beyond 0.9600.
• Renewed weakness in the dollar allows the pair to recover.
• ECB Lagarde, De Guindos speaks later in the session.

The single currency seems to have met bargain hunters and now picks up pace and mtotivates EUR/USD to revisit the 0.9670 region on turnaround Tuesday.

EUR/USD now looks to Lagarde, US data

After five consecutive daily pullbacks, including fresh cycle lows in the mid-0.9500s recorded on Monday, EUR/USD manages to gather some steam and advance past the 0.9600 barrier helped by the renewed selling bias in the dollar.

In the meantime, German 10-year bund yields now recedes from earlier peaks around 2.16%, an area last traded back in December 2011. In the same line, US yields face some weakness following Monday’s multi-year peaks.

In the euro calendar, ECB Chair C.Lagarde will speak in an online event, while Vice-President L. De Guindos will participate in a discussion panel.

Across the pond, the Conference Board will publish the Consumer Confidence gauge seconded by Durable Goods Orders and housing data.

What to look for around EUR

EUR/USD remains under heavy pressure against the backdrop of the unabated rally in the greenback. The pair dropped to levels last seen in June 2002 around 0.9550, although it managed to attempt a mild bounce since then.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The latter has been exacerbated further following the latest rate hike by the Fed and the persevering hawkish message from Powell and the rest of his rate-setters peers.

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: ECB Lagarde (Tuesday) – Germany GfK Consumer Confidence, ECB Lagarde (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Thursday) – EU Emergency Energy Meeting, Germany Retail Sales, France, Italy, EMU Flash Inflation Rate, Germany Unemployment Change, Unemployment Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian post-elections developments. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. 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 0.13% at 0.9620 and a break above 1.0050 (weekly high September 20) would target 1.0197 (monthly high September 12) en route to 1.0262 (100-day SMA). On the downside, initial support lines up at 0.9552 (2022 low September 26) ahead of 0.9411 (weekly low June 17 2002) and finally 0.9386 (weekly low June 10 2002).