EUR/USD climbs to multi-session highs beyond 1.0650 ahead of key data

• EUR/USD reclaims the 1.0600 barrier and beyond.
• The dollar trades well on the defensive below the 105.00 level.
• Investors’ attention remains on the advanced CPI in Germany.

Increasing buying interest lifts EUR/USD to the area of multi-day peaks near 1.0660 on Wednesday.

EUR/USD focuses on German, US data

EUR/USD resumes the upside and leaves behind Tuesday’s daily decline on the back of the renewed and marked selling pressure in the greenback, which prompts the USD Index (DXY) to retreat to the sub-105.00 region.

Extra support for the European currency also came after ECB’s Müller noted that the current tightening cycle is having and effect, although inflation remains well elevated. He also suggested that expectations of rapid rate cuts are wishful thinking. His colleague Villeroy also said that the disinflation implemented will not result in a recession, at the time when he stressed the bank’s commitment to bring inflation back to the 2% goal by end of 2024.

In the docket, Germany’s jobs report showed the Unemployment Change rose by 2K in February and the Unemployment Rate held steady at 5.5% in the same period. Still in Germany, final Manufacturing PMI came at 46.3 9 (from 47.3), while the preliminary inflation figures will be released later in the European afternoon. In the broader Euroland, the final Manufacturing PMI matched the advanced print at 48.5.

In the US, the focus of attention will be on the ISM Manufacturing seconded by Construction Spending and the final Manufacturing PMI.

What to look for around EUR

EUR/USD woke up and reclaimed the area well north of 1.0600 the figure amidst some fresh downside pressure hurting the dollar on Wednesday.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB after the bank has already anticipated another 50 bps rate raise at the March event.

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/EMU Final Manufacturing PMI, Germany Unemployment Change, Flash Inflation Rate (Wednesday) – EMU Flash Inflation Rate, Unemployment Rate, ECB Accounts (Thursday) – Germany Balance of Trade, Final Services PMI, 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 0.68% at 1.0644 and a breakout of 1.0713 (55-day SMA) would target 1.0804 (weekly high February 14) en route to 1.1032 (2023 high February 2). On the flip side, the next support aligns at 1.0532 (monthly low February 27) seconded by 1.0481 (2023 low January 6) and finally 1.0328 (200-day SMA).