EURUSD comes under pressure following highs above 1.0360

• EURUSD faces some profit taking mood and corrects from peaks.
• The dollar bounces tepidly following the recent sharp sell-off.
• EMU’s Industrial Production surprised to the upside in September.

Sellers have returned to the markets and EURUSD gives away part of the recent strong upside on Monday.

EURUSD: Upside limited around 1.0360

After flirting with the August peaks near 1.0370 on Friday, EURUSD now faces some downside pressure although it so far manages well to keep the trade above the key 1.0300 mark at the beginning of the week.

It seems investors are cashing up part of the strong advance seen during the past week, which it is worth noting it was particularly triggered by lower-than-expected US inflation figures during October, which, in turn, fed into speculations that the Federal Reserve could slow the pace of the future interest rate hikes.

In the meantime, the daily downtick in spot comes in line with an equally lacklustre retracement in the German 10-year bund yields at the beginning of the new trading week.

Data wise in Euroland, the Industrial Production in the broader bloc expanded 4.9% from a year earlier in September.

Across the pond, the focus of attention is expected to be on the discussion on Economic Outlook by Vice Chair L.Brainard.

What to look for around EUR

EURUSD faces some downside pressure on Monday following a steep advance in the second half of the last week.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair.

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: EMU Industrial Production (Monday) - EMU Flash Q3 GDP, ZEW Economic Sentiment, Germany ZEW Economic Sentiment (Tuesday) - ECB Financial Stability Review, ECB C.Lagarde (Wednesday) - Final EMU Inflation Rate (Thursday) - ECB C.Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is retreating 0.46% at 1.0305 and faces the next up barrier at 1.0364 (monthly high November 11) seconded by 1.0368 (monthly high August 12) and finally 1.0432 (200-day SMA). On the other hand, a breach of 1.0027 (100-day SMA) would target 0.9935 (low November 10) en route to 0.9730 (monthly low November 3).