EUR/USD regains the smile, advances near 1.1350 ahead of EMU data

• EUR/USD picks up pace on alleviated geopolitical jitters.
• The dollar loses some shine on Russia-Ukraine headlines.
• EMU Flash Q4 GDP, ZEW Economic Sentiment next on tap.

Fresh headlines citing Russian troops are now expected to return to their base lend much-needed oxygen to EUR/USD and lifts it to fresh tops in the mid-1.1300s on Tuesday.

EUR/USD up on risk-on mood

EUR/USD reverses the recent weakness and manages to regain upside traction and reclaim the area beyond the 1.1300 barrier on Tuesday.

The current uptick in spot comes on the back of mitigating concerns around the Russia-Ukraine conflict, which at the same time have removed tailwinds from the greenback and the rest of the safe haven universe.

The recovery in the pair is also accompanied by another uptick in yields of the German 10y Bund, this time retaking the 0.30% region and approaching the recent area of more than 3-year highs recorded on February 10. In the US money markets, the appetite for riskier assets also lifts US yields to the area of recent peaks across the curve.

It will be an interesting day data wise in Euroland, where the ZEW survey is due in Germany and the bloc seconded by another revision of the Q4 GDP in the euro area. Across the Atlantic, Producer Prices, the NY Empire State Index and TIC Flows are all due later in the NA session.

What to look for around EUR

EUR/USD could not sustain the post-US CPI raise to the vicinity of the 1.1500 barrier, sparking a corrective move to the sub-1.1300 area on the back of the renewed and quite strong bias towards the US dollar. Despite the ongoing knee-jerk, the improvement in the pair’s outlook appears underpinned by fresh speculation of a potential interest rate hike by the ECB at some point by year end, higher German yields, persevering elevated inflation and a decent pace of the economic activity and other key fundamentals in the region

Key events in the euro area this week: Advanced EMU Q4 GDP, EMU/Germany ZEW Economic Sentiment (Tuesday) – EMU Industrial Production (Wednesday) – Flash EMU Consumer Confidence (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is advancing 0.34% at 1.1344 and faces the next up barrier at 1.1388 (10-day SMA) followed by 1.1491 (200-week SMA) and finally 1.1494 (2022 high Feb.10). On the other hand, a drop below 1.1279 (weekly low Feb.14) would target 1.1186 (monthly low Nov.24 2021) en route to 1.1121 (2022 low Jan.28).