EUR/USD deflates to the 1.1670 region ahead of Lagarde, Powell

• EUR/USD loses further momentum near 1.1670 on Tuesday.
• Chairwoman Lagarde will speak later at the forum in Sintra.
• Chief Powell will testify before the Senate later in the NA session.

Sellers remain well in control of the sentiment around the shared currency and drags EUR/USD to fresh weekly lows near 1.1670 on turnaround Tuesday.

EUR/USD now looks to 2021 lows

EUR/USD remains well on the defensive on Tuesday, accelerates losses to the 1.1670 region and threatens to challenge the so far 2021 low at 1.1663 (August 20).

The solid performance of the greenback was recently sponsored by Fed-speakers, while the intense move higher in US yields collaborated with the upside momentum in the currency.

In the meantime, investors will pay attention to the annual ECB Forum on Central Banking “Beyond the pandemic: the future of monetary policy” in Sintra (Portugal), which kicks in later today with the speech by Chairwoman C.Lagarde seconded by Board members De Guindos, Panetta, Schnabel. In addition, ECB member Fernandez-Bollo will participate in a debate on banking supervision in the EU and UK in Brussels.

In the domestic docket, the German GfK’s Consumer Confidence improved to 0.3 in October (from -1.1). In France, the same indicator rose to 102 in September. Across the pond, Powell’s testimony will take centre stage seconded by speeches by FOMC’s Bowman and Bostic. In the calendar, the FAFH Index is due followed by the S&PP/Case-Shiller Index, Consumer Confidence and the Richmond Fed Index.

What to look for around EUR

EUR/USD remains fragile and already flirts with YTD lows, always on the back of solid dollar dynamics amidst the persevering selloff in the bonds markets. Higher yields remain the almost exclusive driver behind the improvement in the buck particularly now that the Committee sees higher rates in 2022 and the QE tapering process kicking in “soon”. In the euro region, the loss of momentum in the recovery, as per some weakness seen in key fundamentals, continues to undermine the mood around the shared currency.

Key events in the euro area this week: ECB Forum in Sintra, Germany’s GfK Consumer Confidence, ECB’s Lagarde speech (Tuesday) – ECB Forum in Sintra, final Consumer Confidence, ECB’s Lagarde speech (Wednesday) – German labour market report, German September flash inflation figures (Thursday) – German Retail Sales, final August PMIs, EMU preliminary inflation figures (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. Investors’ shift to European equities in the wake of the pandemic could lend extra oxygen to the single currency. ECB tapering speculations.

EUR/USD levels to watch

So far, spot is losing 0.08% at 1.1686 and faces the next up barrier at 1.1755 (weekly high Sep.22) seconded by 1.1782 (55-day SMA) and finally 1.1845 (weekly high Sep.14). On the other hand, a break below 1.1672 (monthly low Sep.28) would target 1.1663 (2021 low Aug.20) en route to 1.1602 (monthly low Nov.4 2020).