EUR/USD treads water above 1.0900 ahead of US key data

• EUR/USD alternates gains with losses above the 1.0900 mark.
• Germany, EMU Final Services PMI surprised to the upside in January.
• Markets’ attention will be on the US labour market and ISM Non-Manufacturing.

The single currency continues to digest Thursday’s post-ECB acute pullback and motivates the EUR/USD to trade within a tight range in the low-1.0900s on Friday.

EUR/USD focuses on data

Price action around EUR/USD remains muted so far in the European morning amidst increasing prudence among market participants in light of the upcoming US Nonfarm Payrolls for the month of January (185K exp).

In the meantime, investors continue to adjust to the latest ECB event amidst fresh comments from rate setters. On this, Board member Simkus suggested that the March meeting could not see the last 50 bps rate hike, at the time when he left the door open to another hike in May, although he did not give details on its potential size.

In the domestic calendar, final Services PMIs in Germany and the euro area came at 50.7 and 50.8, respectively, for the month of January. In addition, the ECB published its Survey of Professional Forecasters and now see inflation tracked by the HICP higher in 2023 and 2024 while Real GDP growth expectations appear largely unchanged.

Later in the NA session, the US Nonfarm Payrolls will take centre stage seconded by the Unemployment Rate and the ISM Non-Manufacturing.

What to look for around EUR

The pronounced upside pushed EUR/USD north of the key 1.1000 hurdle on Thursday, although the pair retreated markedly in the wake of the ECB event and retested the 1.0880 region.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB after the central bank delivered a 50 bps at its meeting on Thursday.

Back to the euro area, recession concerns now appear to have dwindled, which at the same time remain an important driver sustaining the ongoing recovery in the single currency as well as the hawkish narrative from the ECB.

Key events in the euro area this week: Germany, EMU Final Services PMI, ECB SPF (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst dwindling bets for a recession in the region and still elevated inflation. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.06% at 1.0916 and faces the next up barrier at 1.1032 (2023 high February 2) followed by 1.1100 (round level) and finally 1.1184 (weekly low March 31 2022). On the other hand, the breakdown of 1.0802 (weekly low January 31) would target 1.0766 (weekly low January 17) en route to 1.0648 (55-day SMA).