EUR/USD Faces Resistance at 1.0765, Downside Risks Loom Amid Hawkish Fed and Weak Eurozone Data

EUR: Resistance holds

In the end, EUR/USD did not even get to test resistance at 1.0765 before falling back. 1.0650 seems the risk today given the event risk of hawkish Fed speakers. Locally, the focus will be on the eurozone PPI figures, another set of weak German industrial production figures and some European Central Bank speakers later in the day.

As we have been saying recently, the euro story looks weak and EUR/USD will only rally if the US story is weak enough to trigger some clear bullish flattening of the US yield curve. That scenario looks premature. The baseline may be some kind of 1.0550-1.0750 range now unless the US data takes a decided turn for the worse.

Elsewhere, the Scandi FX story has been interesting. The Swedish krona understandably did well in the lower rate, risk-on environment. The Norwegian krone performance has been very underwhelming and warns that EUR/NOK could be banging on the door at 12.00 again if US rates move higher again. Here, look out for event risks from US Treasury auctions this week. Three, ten and thirty-year Treasuries are auctioned today through Thursday.