EUR/USD: Upside faltered ahead of 1.1370

• EUR/USD regains composure and advances beyond 1.1300.
• The greenback remains offered as risk aversion fades away.
•  The US Consumer Confidence comes next in the docket.

The single currency managed to leave behind the geopolitics-led pessimism seen earlier in the session and pushed EUR/USD to the 1.1370 region on Tuesday.

EUR/USD up on dollar weakness

EUR/USD, therefore, reverses three straight sessions with losses and bounces off daily lows in the 1.1290/85 band following the irruption of the appetite for the risk complex, which in turn encouraged USD-bears to return to the market and drag the US Dollar Index (DXY) back to the negative territory.

Bolstering the upside momentum in spot also emerges the moderate rebound in yields of the German 10y Bund to 3-day highs around the 0.28% zone.

In the domestic calendar, better-than-expected Business Climate in Germany for the month of February also underpinned the recovery in the pair. Across the pond, house prices tracked by the FHFA’s House Price Index rose 1.2% MoM in December, while the S&P/Case-Shiller Index rose 18.6% YoY in the same month. Further US data saw flash Manufacturing PMI at 57.5 in February, while the Conference Board will publish its Consumer Confidence gauge later in the session.

What to look for around EUR

EUR/USD continues to look to the geopolitical scenario and the risk appetite trends for near-term direction. On this, further deterioration of the Russia-Ukraine front should keep the pair under pressure via a stronger dollar. In the meantime, 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. The threat to this view, as usual, comes from the Fed and a potential tighter-than-expected start of the normalization of its monetary conditions.

Key events in the euro area this week: Germany, EMU Flash PMIs (Monday) – Germany IFO survey (Tuesday) – Germany GfK Consumer Confidence, EMU Final January CPI (Wednesday) – Eurogroup Meeting, Germany Final Q4 GDP, EMU Final Consumer Confidence, ECB Lagarde (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 gaining 0.32% at 1.1344 and faces the next up barrier at 1.1395 (weekly high Feb.16) followed by 1.1487 (200-week SMA) and finally 1.1494 (2022 high Feb.10). On the other hand, a drop below 1.1287 (weekly low Feb.22) would target 1.1279 (weekly low Feb.14) en route to 1.1186 (monthly low Nov.24 2021).