EUR/USD surrenders gains, near 1.0450 ahead of German CPI

The upbeat momentum in the greenback remains well and sound during the first half of the week, now dragging EUR/USD to the 1.0460/50 band ahead of German data.

EUR/USD focus on German CPI, US ISM

The pair has faded the initial spike to the 1.0490 region and is now returning to the mid-1.0400s in response to an increasing buying interest surrounding the buck.

In fact, the Dollar seems to have regained part of the upside momentum lost during the last week of 2016, limiting the pair’s upside to the area just below the 1.0500 handle for the time being.

Later in the session, German unemployment data will be out ahead of December’s advanced inflation figures tracked by the CPI and the broader HICP. Market expectations see consumer prices to have substantially risen at an annualized 1.5% and 1.3% when measured by the HICP vs. November’s 0.8% YoY and 0.7% YoY, respectively.

In the meantime, spot continues to retrace last week’s spike to the mid-1.0600s, although it so far shows some stabilization around 1.0450, up around a cent since fresh 14-year lows at 1.0350 seen on December 20.

According to the latest CFTC report, speculators have reduced their EUR net shorts position to levels last seen in late June 2016 during the week ended on December 27.

On the US data front, the manufacturing sector will take centre stage later in the session in light of the gauges by Markit and the ISM for the month of December.

EUR/USD levels to watch

The pair is now up 0.10% at 1.0465 facing the next support at 1.0369 (low Dec.28) ahead of 1.0350 (2016 low Dec.20) and finally 1.000 (psychological level). On the other hand, a breakout of 1.0534 (high Jan.2) would target 1.0654 (spike Dec.30) en route to 1.0690 (55-day sma).