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USD Recovery Continues

The US Dollar has seen better demand over recent sessions with the Dollar Index posting a small recovery for now. With a slew of data to come this week, starting with ISM data later today and culminating with jobs data on Friday, there is plenty of volatility risk to monitor this week. For now, it seems the rally in USD is mainly being fuelled by weakness in EUR on the back of dovish ECB comments yesterday.
 

Schnabel Shifts on Rates

ECB’s Schnabel yesterday signaled that further tightening was off the table on the back of recent inflation data and eurozone growth data. Additionally, Schnabel said that the ECB should not look to keep rates steady through 2024, suggesting support for cuts. Schnabel’s comments were particularly market-moving given that just a month ago she was heard voicing support for further tightening if needed. The market is seemingly taking these comments as a sign of a deeper shift at the ECB.
 

US Jobs Data Due

Looking ahead, the main focus this week will of course be on the latest US jobs reports on Friday. Given the dovish shift in terms of the market’s Fed expectations, signs of further weakness will be firmly bearish for USD. However, if we see any fresh upside, particularly in wage growth, this might allow the current USD recovery room to continue near term, putting further pressure on EURUSD.
 

Technical Views

EURUSD

(Click on image to enlarge)

The failure at the retest of the broken bull trend line has seen EURUSD reversing sharply lower. Price is now back below the 1.0937 level and testing support at the 1.0785 level. This is a key pivot for the market with a break lower here opening the way for a much deeper move towards 1.0515 next. 

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