EUR/USD turns positive near 1.0830 ahead of key data

• EUR/USD regains some poise near the 1.0830 region.
• German 10-year yields look to extend the recovery near 2.20%.
• Economic Sentiment in Germany and EMU come next in the docket.

The European currency attempts to leave behind the recent weakness and motivates EUR/USD to advance modestly and revisit the 1.0830 region on Tuesday.

EUR/USD remains well supported around 1.0800

EUR/USD so far sets aside two consecutive daily pullbacks against the backdrop of the improvement in the risk complex, especially after auspicious results from Chinese fundamentals released during early trade.

By the same token, the dollar sees its recent recovery somewhat curtailed and forces the USD Index (DXY) to surrender some of its recent gains amidst the resumption of the normal activity in the US markets.

Data wise in the region, all the attention is expected to be on the Economic Sentiment print of both Germany and the Euroland ahead of the ECOFIN Meeting. Earlier in the session, final inflation figures in Germany saw the CPI contract 0.8% MoM in December and rise 8.6% over the last twelve months.

Across the Atlantic, the NY Empire State Index will be in the limelight seconded by short-term bill auctions and the speech by FOMC’s J.Williams.

What to look for around EUR

EUR/USD appears so far well underpinned by the 1.0800 neighbourhood amidst some renewed weakness and inconclusive trends in the risk appetite.

Price action around the European currency should continue to closely follow dollar dynamics, as well as the impact of the energy crisis on the euro bloc and the Fed-ECB divergence.

Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: ECOFIN Meeting, Germany Final Inflation Rate / ZEW Economic Sentiment, EMU ZEW Economic Sentiment, Italy Final Inflation Rate (Tuesday) -  EMU New Car Registrations / Final Inflation Rate (Wednesday) – ECB Lagarde, ECB Accounts (Thursday) - ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst diminishing probability of a recession in the region. Impact of the war in Ukraine and the protracted energy crisis on the bloc’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.09% at 1.0830 and faces the next up barrier at 1.0874 (monthly high January 16) followed by 1.0900 (round level) and finally 1.0936 (weekly high April 21 2022). On the flip side, the breakdown of 1.0481 (monthly low January 6) would target 1.0476 (55-day SMA) en route to 1.0443 (weekly low December 7).