EUR/USD: Sellers return to the market and retreat to 0.9750

• EUR/USD loses the grip and slips back to the mid-0.9700s.
• The greenback regains some poise following the post-CPI drop.
• US Retail Sales, preliminary Consumer Sentiment next of note.

The European currency gives away part of the recent gains vs. the dollar and motivates EUR/USD to recede to the 0.9750 region at the end of the week.

EUR/USD offered on USD-buying

The risk-off sentiment returns to the markets and lend support to the greenback, forcing at the same time the EUR/USD to surrender part of the recent strong advance to the area just above 0.9800 the figure.

The corrective decline in the pair comes along another downtick in the German 10-year bund yields, this time retreating to multi-session lows and shedding ground for the fourth consecutive day.

No changes to the macro scenario so far, as the persistent elevated inflation in the US economy did nothing but reinforce the case for the tighter-for-longer stance from the Fed as well as a most-likely 75 bps rate hike at the November meeting.

In the domestic calendar, final Inflation Rate in France showed the CPI contract 0.6% MoM in September and rise 5.6% from a year earlier. Next on tap in the region will be the EMU Balance of Trade for the month of August.

Across the pond, all the attention is expected to be on the release of Retail Sales and the preliminary reading of the Michigan Consumer Sentiment for October.

What to look for around EUR

EUR/USD meets some initial resistance in the area just past the 0.9800 mark so far this week, as investors continue to digest the recently published US inflation figures for the month of September.

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 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 down 0.21% at 0.9757 and a drop below 0.9631 (monthly low October 13) would target 0.9535 (2022 low September 28) en route to 0.9411 (weekly low June 17 2002). On the flip side, the next up barrier emerges at 0.9808 (weekly high October 13) seconded by 0.9999 (monthly high October 4) and finally 1.0050 (weekly high September 20).