Jakarta, GIC Trade – The euro currency corrected to test the 1.0680 region as the U.S. dollar regained its appeal after falling to a multi-week low in the previous session in response to growing speculation that the Fed might pause its hiking cycle soon after the March meeting, amid heightened concerns in the U.S. banking sector.
 
Markets remained relatively quiet on Tuesday morning as investors tried to figure out how major central bank policy would shape after the collapse of Silicon Valley Bank (SVB) revealed vulnerabilities in the financial sector. 
 
Ahead of the February Consumer Price Index (CPI) data from the US, the US Dollar Index maintained a modest recovery near 104.00 and the benchmark US bond yield for the 10-year is seen steady at around 3.5%.
 
Meanwhile, the euro's correction was also driven by the release of industrial production data in Italy which contracted by 0.7% in January, despite increasing by 1.4% over the past twelve months.
 
On the other hand, the price action around European currencies will continue to follow the dynamics of the dollar, as well as the potential further move from the ECB after the March meeting, when the bank has anticipated another 50 bps rate hike.
 
The continuation of the ECB's hiking cycle comes amid reduced expectations for a recession in the region and still high inflation. The impact of the Russia-Ukraine war on the growth outlook and inflation outlook in the eurozone area.
 
Fundamentally, the release of Italian industrial production data that contracted and rebounded in the US dollar pushed the euro currency to correct. Then how technically, see the following analysis:
 
Technical Analysis

 
EUR/USD on the 1-hour period tried to move downwards touching the 1.06782 support area towards the next support level at 1.06560 to turn its bias bearish. As for further bulls, EUR/USD needs to break through the resistance area at 1.07368 towards the next resistance level at 1.08000.
 
The EUR/USD correction is also visible from the MACD indicator which shows a hologram bar that is shrinking and heading towards negative territory.
 
This analysis is a fundamental and technical view used by the author, not a suggestion or invitation. To get more information click on the image below.