Despite volatility in the EURUSD pair is at multi-month lows, the euro failed to hold at the 1.10 handle and dipped to early October lows around 1.0980 on Friday. Month-end flows coupled with a de facto holiday in the Unites States could serve as a catalyst for the bears after a boring consolidation with a negative bias during the week.
Interestingly, the common currency once again ignored positive economic updates out of Eurozone. The region’s inflation increased in November to 1.0% up from 0.7% previously. Furthermore, the core CPI came in at 1.3% versus 1.1% earlier. This pickup in inflation is essentially a positive signal for the European Central Bank. Still, the numbers remain well below the target, so it will take quite a long time to see consumer prices in line with the target. Besides, it could be just a one-time jump in November, though December CPI could show good results as well. Anyway, it seems that euro traders prefer to react to the upcoming data rather cautiously, with concerns over the outlook for the region’s economy persisting.
On the negative side, the ECB Board nominee Panetta called for an accommodative monetary policy and highlighted that that the slowdown in growth is proving to be more protracted than expected. Meanwhile, another ECB Board nominee, Schnabel said that September stimulus can be justified by current inflation data as well as the outlook for inflation over the medium-term. These dovish comments served as a bearish catalyst for the common currency, which extended the lows below 1.10.
A break to 1.0980, despite the subsequent correction, suggests further losses could be ahead for the euro, especially on the back of stronger dollar. The prevailing safe-haven demand plays against the pair as well. Should the single currency resume the decline, EURUSD could target the 1.0930 once the 1.0980 area is broken. To ease the current selling pressure, the bulls need to take the prices at least above 1.1030. For now, downside risks persist both in the short-term and weekly charts. The key level on the upside comes around 1.1070, where the 100-DMA lies.