EUR/USD: Bears retake control and retest 0.9930

• EUR/USD remains under pressure well below parity.
• German 10y Bund yields flirt with 2-month highs near 1.40%.
• US Durable Goods Orders next of relevance in the calendar.

The single currency resumes the downside and drags EUR/USD back to the 0.9930 region on Wednesday, where some initial contention appears to have turned up.

EUR/USD looks to USD, risk trends

EUR/USD so far fades part of Tuesday’s bullish attempt and navigates the 0.9950 region on the back of the resumption of the buying interest around the US dollar, which in turn remains underpinned by prospects for the continuation of the Fed’s normalization process via extra interest rate hikes.

The downtick in the pair comes along further rebound in the German 10y Bund yields, which already flirt with 2-month peaks in the vicinity of 1.40%. The bounce in German yields falls in line with the continuation of the uptrend from their American counterparts.

Moving forward, spot is expected to keep the cautious stance ahead of the release of US inflation figures gauged by the PCE and the speech by Fed’s Powell at the Jackson Hole Symposium, both events due on Friday.

Nothing scheduled data wise in the euro area on Wednesday should leave the attention to the publication of Durable Goods Orders, Pending Home Sales and the weekly report on Mortgage Applications by the MBA expected later in the NA session.

What to look for around EUR

EUR/USD managed to rebound from new nearly 2-decade lows in the sub-0.9900 zone on Tuesday following some loss of upside momentum in the greenback.

Price action around the European currency, in the meantime, is expected to closely follow dollar dynamics, geopolitical concerns, fragmentation worries and the Fed-ECB divergence.

On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges and the incipient slowdown in some fundamentals.

Key events in the euro area this week: Germany Final Q2 GDP Growth Rate, Germany IFO Business Climate, ECB Accounts (Thursday) – Germany GfK Consumer Confidence.

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine on the region’s growth prospects and inflation.

EUR/USD levels to watch

So far, spot is losing 0.16% at 0.9952 and a break below 0.9899 (2022 low August 23) would target 0.9859 (December 2002 low) en route to 0.9685 (October 2022 low). On the other hand, the next up barrier comes at 1.0202 (high August 17) followed by 1.0267 (55-day SMA) and finally 1.0368 (monthly high August 10).