EUR/USD stays offered, bounces off 2021 lows near 1.1450

• EUR/USD drops to new cycle lows near 1.1450.
• The firm note in the dollar keeps the pair under pressure.
• ECB-speak, ECB Macroeconomic Projections next on tap.

The selling pressure the European currency is undergoing remains well and sound and has forced EUR/USD to record new 2021 lows in the mid-1.1400s on Thursday.

EUR/USD looks to USD, ECB

EUR/USD is sheding ground for the second session in a row following the nearly 1% decline witnessed on Wednesday, in response to the abrupt rebound in the dollar after US inflation figures rose to 30-year high at 6.2% in the year to October.

The spot price collapsed pari passu with the move higher in the buck, which was also underpinned by rising US yields along the curve and speculations of a sooner-than-expected lift-off in rates by the Fed. On the latter front, market participants seem to be pencilling in three hikes during 2022.

Nothing is scheduled on the euro docket on Thursday, while attention will be focused on the publication of the ECB’s Macroeconomic Projections and speeches by Board members P.Lane and I.Schnabel.

What to look for around EUR

The outlook for EUR/USD has deteriorated further following Wednesday’s slump to sub-1.1500 levels. As usual, the pair’s price action is predicted to mainly track the dynamics around the dollar, while bouts of occasional strength are seen coming from broad risk appetite trends. On the more macro view, the loss of momentum in the economic recovery in the region - as per some weakness observed in key fundamentals – coupled with rising cases of COVID-19 is also seen pouring cold water on investors’ optimism and tempering bullish attempts in the shared currency. Further out, the euro should remain under scrutiny amidst the implicit debate between investors’ expectations of a probable lift-off sooner than anticipated and the ECB’s so far steady hand, all amidst the persevering elevated inflation in the bloc and rising convinction that it could extend further than previously estimated.

Key events in the euro area this week: EMU Industrial Production (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the region. Sustainability of the pick-up in inflation figures. Pick-up in the political effervescence around the EU Recovery Fund in light of the rising conflict between the EU, Poland and Hungary on the rule of law. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is down 0.12% at 1.1464 and faces the next up barrier at 1.1609 (weekly high November 9) seconded by 1.1616 (monthly high Nov.4) and finally 1.1668 (55-day SMA). On the other hand, a break below 1.1453 (2021 low Nov.11) would target 1.1422 (monthly high Jun.10 2020) en route to 1.1300 (round level).