EUR/USD eases from recent peaks and retests 1.1030

• EUR/USD corrects lower from peaks above 1.1100.
• The dollar gathers some renewed traction on geopolitics.
• EMU trade deficit widened to €27.2B in January.

The single currency gives away some gains and forces EUR/USD to abandon the area of recent tops past 1.1100 and revisits the 1.1030 region on Friday.

EUR/USD weaker on risk aversion

EUR/USD trades on the defensive for the first time this week and comes under some pressure after hitting new 2-week peaks around 1.1140 on Thursday.

The knee-jerk in the pair comes in response to renewed concerns in the geopolitical landscape and after Russia-Ukraine peace talks appear to have stalled in past hours.

The resumption of the risk aversion among traders is also seen in the demand for bonds in money markets on both sides of the Atlantic, with the German 10y bund extending the decline to the 0.35% area and its US peer flirting with the 2.15% region.

In the docket, trade balance figures in the broader Euroland showed the trade deficit clinched a new record at €27.2B during January.

Data across the pond includes the CB Leading Index, Existing Home Sales and speeches by FOMC’s T.Barkin, C.Evans and M.Bowman.

What to look for around EUR

The European currency meets some fresh selling bias at the end of the week and fades the recent uptick to the 1.1140 region, all amidst the fresh bout of risk aversion stemming from the deterioration of the geopolitical arena. Pockets of strength in the euro, in the meantime, should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a firmer currency for the time being.

Key events in the euro area this week: EMU Balance of Trade (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. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is retreating 0.48% at 1.1036 and faces the next up barrier at 1.1137 (weekly high Mar.17) followed by 1.1245 (55-day SMA) and finally 1.1294 (100-day SMA). On the other hand, a drop below 1.0977 (10-day SMA) would target 1.0900 (weekly low Mar.14) en route to 1.0805 (2022 low Mar.7).