• EUR/USD alternates gains with losses in the low-1.0800s.
• The dollar remains slightly bid around 102.30 gauged by the DXY.
• US stock/bond markets will return to normality on Tuesday.

The absence of direction remains unchanged around EUR/USD at the beginning of the week.

EUR/USD meets support around 1.0800

The sharp recovery in EUR/USD from lows near 1.0480 (January 6) seems to have met some decent resistance around the 1.0880 region, or YTD peaks, so far on Monday.

In the meantime, the inconclusive price action around the pair comes in tandem with the lacklustre bounce in the greenback, all against the backdrop of scarce volatility and reduced trade conditions in response to the holiday in the US.

Data wise in the region, Wholesale Prices in Germany contracted 1.6% MoM in December and rose 12.8% over the last twelve months.

What to look for around EUR

EUR/USD gives away some gains and returns to the negative territory following an earlier climb to new highs around 1.0880.

Price action around the European currency should continue to closely follow dollar dynamics, as well as the impact of the energy crisis on the euro bloc and the Fed-ECB divergence.

Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon.

Key events in the euro area this week: Eurogroup Meeting (Monday) – ECOFIN Meeting, Germany Final Inflation Rate / ZEW Economic Sentiment, EMU ZEW Economic Sentiment, Italy Final Inflation Rate (Tuesday) -  EMU New Car Registrations / Final Inflation Rate (Wednesday) – ECB Lagarde, ECB Accounts (Thursday) - ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle amidst diminishing probability of a recession in the region. Impact of the war in Ukraine and the protracted energy crisis on the bloc’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is losing 0.12% at 1.0818 and the breakdown of 1.0481 (monthly low January 6) would target 1.0443 (weekly low December 7) en route to 1.0459 (55-day SMA). On the upside, the initial hurdle emerges at 1.0874 (monthly high January 16) followed by 1.0900 (round level) and finally 1.0936 (weekly high April 21 2022).