• EUR/USD navigates a narrow range amidst vacillating markets.
• The dollar also trades in an erratic fashion despite higher yields.
• Markets’ attention gyrates to Thursday’s US CPI release.

EUR/USD manages well to keep the trade in the area of multi-month peaks around 1.0740 so far on Tuesday.

EUR/USD remains supported above 1.0700

The generalized absence of volatility in the global markets motivates EUR/USD to alternate gains with losses above 1.0700 the figure, while bulls see their aspirations somewhat limited around 1.0760 for the time being.

The modest uptick in the pair comes in line with the equally humble advance in the German 10-year Bund yields, which add to Monday’s gains near 2.30%.

Earlier in the session, Industrial Production in France expanded 0.2% MoM in November, whereas the NFIB Business Optimism Index dropped to 89.8 in December.

Later in the US docket comes the IBD/TIPP Economic Optimism Index followed by Wholesale Inventories.

What to look for around EUR

EUR/USD has embarked on a strong recovery and has already retaken the key barrier at 1.0700 the figure and beyond.

In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region 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: France Industrial Production (Tuesday) – France final Inflation Rate, Germany Full Year GDP Growth, MEU Balance of Trade/Industrial Production (Friday).

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

EUR/USD levels to watch

So far, the pair is gaining 0.05% at 1.0733 and faces the next resistance level at 1.0760 (monthly high January 9) followed by 1.0773 (monthly high June 27) and finally 1.0786 (monthly high May 30 2022). On the downside, the breach of 1.0496 (monthly low January 6) would target 1.0443 (weekly low December 7) en route to 1.0398 (55-day SMA).