EUR/USD: Possible Bearish Scenario Ahead.

EUR/USD may slip back to 1.0650/1.0700 should core inflation come in at 0.4% or 0.5% MoM – ING

So far, EUR/USD has advanced for the second session in a row, extending Monday's rebound past the 1.0700 level.

The daily increase in the pair coincides with the continuation of selling pressure in the dollar ahead of the release of US inflation figures due later across the pond.

Meanwhile, falling US yields across the curve are accompanying the daily retracement in spot, as are further range bound German 10-year Bund yields.

Later in the day, another revision to Q4 GDP will be the region's only release on Tuesday.

What to search for Following Monday's drop to the 1.0650 region, EUR/USD appears to have begun a decent bounce, though the resistance line around 1.0800 continues to cap occasional bullish attempts for the time being.

Meanwhile, price action around the European currency should continue to closely track dollar dynamics, as well as the ECB's potential next moves after the central bank delivered a 50 basis point cut at its meeting last week.

Returning to the eurozone, recession fears appear to be fading, but they remain an important driver of the single currency's ongoing recovery as well as the ECB's hawkish narrative.

This week's key events in the eurozone include the ECOFIN meeting, EMU Flash Q4 GDP (Tuesday), EMU Balance of Trade, Industrial Production, and ECB Lagarde's speech (Wednesday).

On the back burner: the continuation of the ECB's hiking cycle amid dwindling bets on a regional recession and still elevated inflation. The impact of the Russia-Ukraine conflict on the region's growth prospects and inflation outlook. Inflationary risks are becoming entrenched.

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