EUR/USD is attempting a mild recovery toward 1.0900 early Monday, as the US Dollar bulls take a breather after the recent upsurge. Mixed ECB-speak and a cautious market mood could limit the further upside in the pair. EU Industrial Production data eyed.
The Fibonacci 38.2% retracement of the latest uptrend aligns as a key pivot level at 1.0870. If EUR/USD stabilizes above that level by using it as support, it could extend its upward correction to 1.0900 (psychological level, 20-period Simple Moving Average (SMA) on the four-hour chart) and 1.0950/1.0960 (Fibonacci 23.6% retracement, 200-period SMA).
On the downside, interim support seems to have formed at 1.0850 ahead of 1.0800 (psychological level, Fibonacci 50% retracement).
EUR/USD has started the new week on a firm footing and erased a small portion of last week’s losses. The pair could extend its correction in case buyers continue to defend 1.0870.
The broad-based US Dollar strength amid risk aversion weighed heavily on EUR/USD ahead of the weekend and the pair touched its lowest level in a month below 1.0850 on Friday. Early Monday, Euro Stoxx 50 trade in positive territory and US stock index futures rise between 0.25% and 0.35%, reflecting an improving market mood.
Over the weekend, European Central Bank (ECB) officials delivered a mixed message regarding the policy outlook. ECB Vice President Luis de Guindos told an Italian newspaper that they have now entered the home stretch of the monetary policy tightening path. On a hawkish note, “the ECB may need to raise interest rates longer than previously thought to help tame inflationary pressures,” policymaker Peter Kazimir said.
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