EUR/USD regains the smile above 0.9700

• EUR/USD alternates gains with losses around the 0.9700 zone.
• The dollar looks slightly bid above the 113.00 hurdle on Tuesday.
• ECB-speak, Italian Industrial Production next on tap in the docket.

EUR/USD seems to have met some contention in the 0.9670 zone and now attempts to regain the 0.9700 barrier and above.

EUR/USD looks to USD, risk trends

EUR/USD gives some signs of life after four consecutive daily declines and clings to the 0.9700 region on turnaround Tuesday.

The bullish attempt in the pair comes amidst marginal gains in the greenback and a knee-jerk in the German 10-year benchmark, al after hitting fresh 11-year highs past 2.35% at the beginning of the week.

In the domestic calendar, Italian Industrial Production will be the sole release seconded by speeches by ECB’s A.Enria and P.Lane. Across the pond, FOMC’s Harker and Mester are also due to speak in an otherwise empty docket.

What to look for around EUR

EUR/USD’s leg lower seems to have met some initial contention in the 0.9670/65 band so far this week.

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 Industrial Production, ECB Lagarde (Wednesday) – Germany Final Inflation Rate (Thursday) – EMU Balance of Trade (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 0.15% at 0.9712 and the surpass of 0.9999 (weekly high October 4) would target 1.0050 (weekly high September 20) en route to 1.0197 (monthly high September 12). On the other hand, there is an immediate support at 0.9535 (2022 low September 28) ahead of 0.9411 (weekly low June 17 2002) and finally 0.9386 (weekly low June 10 2002).