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EURUSD: Bears remain in control below 1.0100

  • EURUSD keeps the bearish tone unchanged in the sub-1.0100 area.
  • The dollar’s recovery comes amidst higher US yields.
  • US inflation, midterm elections results stay in centre stage.

The selling bias continues to hurt the European currency and keeps EURUSD well under pressure below the 1.0100 zone on Wednesday.

EURUSD offered on USD-buying

EURUSD falters once again just ahead of the key 1.0100 region – where the October and November peaks coincide so far – and triggers a corrective decline amidst some profit taking mood following three sessions in a row with strong gains.

In addition, fresh buying around the greenback appears underpinned by uncertainty around the results from the US midterm elections and increasing cautiousness in light of the release of US inflation figures on Thursday.

The downtick in the pair comes in line with another negative session in the German 10-year bund yields, which recede to 3-day lows near 2.20%. Earlier in the session, a 10-year bund auction came at 2.25%.

In the US docket, MBA Mortgage Applications contracted 0.1% in the week to November 4 and Wholesale Inventories figures are due later.

What to look for around EUR

EURUSD faces some selling pressure near the 1.0100 region amidst another bullish attempt in the greenback.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair.

Furthermore, the increasing speculation of a potential recession in the region – which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: Italy Industrial Production (Thursday) – Germany Final Inflation Rate (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is retreating 0.48% at 1.0022 and a breach of 0.9888 (55-day SMA) would target 0.9730 (monthly low November 3) en route to 0.9704 (weekly low October 21). On the other hand, initial resistance comes at 1.0096 (monthly high November 8) seconded by 1.0197 (monthly high September 12) and finally 1.0368 (monthly high August 12).