- EUR/USD extends the rally to the 1.1470 region.
- Yields of the German 10y Bund record tops near the 0.20% level.
- Markets’ attention will be on the release of US Nonfarm Payrolls.
The buying pressure around the European currency remains well and sound and now lifts EUR/USD to fresh 3-week highs near 1.1470 on Friday.
EUR/USD bolstered by ECB, now looks to US NFP
EUR/USD advances for the sixth consecutive session for the first time since late-August/early-September 2021 and already trades at shouting distance from the YTD peaks in the 1.1480/85 band (January 14).
The renewed selling pressure around the greenback coupled with the surprising hawkish tilt at the ECB on Thursday lent extra wings to the pair’s weekly bounce, which already surpasses the 3% since 2022 lows recorded on January 28 near 1.1120.
In the wake of the ECB event and pari passu with the strong upside in the pair, yields of the key 10y German Bund advanced to new highs around 0.20%, an area last traded in February 2019.
In the domestic docket, German Factory Orders expanded 2.8% MoM in December and the Construction PMI improved to 54.4 in January. In the broader Euroland, Retail Sales for the month of December come next.
Across the pond, all the attention will be on the publication of the Nonfarm Payrolls and the Unemployment Rate for the month of January.
What to look for around EUR
EUR/USD extends the optimism for yet another session on Friday and approaches the 2022 high, always bolstered by the prevailing risk-on sentiment, which was in turn boosted by the hawkish message from the ECB event on Thursday. Rising speculation of a potential ECB lift-off in September/December continues to underpin the solid upside momentum in the pair, which remains also propped up by higher yields in the German money markets.
Key events in the euro area this week: EMU Retail Sales (Friday).
Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.
EUR/USD levels to watch
So far, spot is gaining 0.20% at 1.1457 and faces the next up barrier at 1.1482 (2022 high Jan.14) followed by 1.1500 (200-week SMA) and finally 1.1676 (200-day SMA). On the other hand, a break below 1.1308 (55-day SMA) would target 1.1121 (2022 low Jan.28) en route to 1.1100 (round level).