EUR/USD hovers around 1.1050, looks to Powell, Ukraine

• EUR/USD navigates without direction in the 1.1050 region.
• ECB’s Lagarde sees no signs of stagflation so far.
• Chief Powell will speak later in the NA session.

EUR/USD looks to leave behind Friday’s pullback amidst alternating risk appetite trends at the beginning of the week.

EUR/USD focuses on Powell, geopolitics

EUR/USD starts the trading week around the mid-1.1000s amidst the absence of traction in either direction, the recovery in yields on both sides of the ocean and no relevant news from the Russia-Ukraine front.

In fact, German 10y bund yields leave behind the recent weakness and advance to the 0.40% region, while their US peer flirt with the 2.20% mark once again.

No reaction in the European currency after ECB’s Chairwoman C.Lagarde said earlier in the session that she does not see elements of stagflation in the current context, at the time when she also ruled out any sync with the Fed’s policies.

In the domestic docket, German Producer Prices rose 1.4% MoM and 25.9% in the year to February. Across the Atlantic, Chief Powell is due to speak along with FOMC’s Bostic. In the US docket, the sole release will be the Chicago Fed National Activity Index.

What to look for around EUR

The European currency manages to bounce off Friday’s lows in the 1.1000 neighbourhood, although the bullish attempt seems to have run out of steam around 1.1060 so far. In the meantime, pockets of strength in the euro 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: Germany Producer Prices, ECB Lagarde (Monday) – ECB Lagarde (Tuesday) – Germany, EMU Flash PMIs (Thursday) – Germany IFO Business Climate (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 advancing 0.05% at 1.1055 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1241 (55-day SMA) and finally 1.1289 (100-day SMA). On the other hand, a drop below 1.1002 (low March 18) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).