EUR/USD: Bulls back in driving-seat at around 1.0500
|- EUR/USD fades initial pessimism and retakes 1.0500 and above.
- ECB Accounts come next in the domestic calendar.
- Initial Claims, Philly Fed index takes centre stage across the pond.
The European currency regains its smile and lifts EUR/USD back above the 1.0500 mark on Thursday.
EUR/USD propped up by USD-selling
EUR/USD fades Wednesday’s pullback and keeps the upbeat tone despite the sentiment around the risk complex remaining sour on Thursday.
Indeed, the dollar is suffering due to some selling despite the broad-based mood remaining tilted towards risk-off and against the backdrop of further weakness in US yields along the length of the curve.
On the latter, the German 10y Bund yields have also added to Wednesday’s pullback and returned to the 0.95% region.
On the calendar, the EMU Current Account surplus widened to €8.66B in March (from €6.5B). Later in the session, the ECB will publish its Accounts of the last meeting.
In the US data space, the usual weekly Claims are due seconded by the Philly Fed Index and the CB Leading Index and Existing Home Sales.
What to look for around EUR
EUR/USD’s strong rebound has met an initial hurdle in the 1.0560 region so far this week. Despite the pair shaking off some of its downside pressure, the broader outlook for the single currency remains entrenched in negative territory for the time being. As usual, price action in spot should reflect dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by firmer speculation the ECB could raise rates at some point in the summer, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.
Key events in the euro area this week: ECB Monetary Policy Meeting Accounts (Thursday) – Germany Producer Prices, EMU Flash Consumer Confidence (Friday).
Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro area. Impact of the war in Ukraine on the region’s growth prospects.
EUR/USD levels to watch
So far, spot is gaining 0.30% at 1.0492 and faces the initial hurdle at 1.0563 (weekly high May 18) seconded by 1.0641 (weekly high May 5) and finally 1.0936 (weekly high April 21). On the other hand, a breach of 1.0348 (2022 low May 13) would target 1.0340 (2017 low January 3 2017) en route to 1.0300 (round level).
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