EUR/USD remains offered and breaks below 1.1200

• EUR/USD adds to recent losses in the sub-1.1200 area.
• The dollar remains strong and weighs on the pair.
• ECB Lagarde, US PCE next of importance in the calendar.

Sellers remain in control of the shared currency and drag EUR/USD back below 1.1200 the figure at the end of the week.

EUR/USD looks to Russia-Ukraine

EUR/USD is down for the third session in a row on Friday, always on the back of the solid demand for the greenback, which remains in turn underpinned by the persistent risk aversion.

Indeed, investors keep favouring the “flight-to-safety” sentiment at the end of the week against the backdrop of further deterioration in the Russia-Ukraine front.

The move lower in spot came in tandem with renewed weakness in yields of the key 10y German Bund, now gyrating around the 0.16% area as the demand for bonds remain firm.

In the domestic docket, final Germany GDP Growth Rate showed the economy expanded 1.8% YoY in Q4 and contracted 0.3% inter-quarter. In addition, ECB’s M3 Money Supply expanded 6.4% in the year to January. Later in the session, the final EMU Consumer Confidence is due ahead of the speech by ECB’s Lagarde.

Across the pond, PCE and Core PCE are due followed by Durable Goods Orders, Personal Income/Spending and the final Consumer Sentiment gauge.

What to look for around EUR

EUR/USD continues to look to the geopolitical scenario and risk appetite trends for near-term direction. On this, the recent deterioration of the Russia-Ukraine front is expected to keep the pair under pressure amidst solid risk-off sentiment and demand for the greenback. In the meantime, bouts of strength in the pair should remain underpinned by speculation of a potential interest rate hike by the ECB probably sooner than many anticipate, higher German yields, persevering elevated inflation and a decent pace of the economic activity and auspicious results from 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: 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 losing 0.14% at 1.1175 and faces the next up barrier at 1.1323 (55-day SMA) followed by 1.1390 (weekly high Feb.21) and finally 1.1395 (weekly high Feb.16). On the other hand, a drop below 1.1106 (2022 low Feb.24) would target 1.1100 (round level) en route to 1.1000 (round level).