EUR/USD accelerates losses and threatens 1.0500

Sellers regain control of the sentiment around the European currency and force EUR/USD to come down and revisit the vicinity of the 1.0500 neighbourhood on Monday.

EUR/USD looks to data, US yields

EUR/USD quickly leaves behind Friday’s bullish attempt and refocuses on the downside in a context once again dominated by the upside bias in the greenback and persistent high yields.

Indeed, US yields continue to rise in the belly and the long end of the curve, while the German 10y bund yields keep trading close to the 1.0% area.

In the euro docket, earlier results saw German Retail Sales contract 2.7% in the year to March and the final Manufacturing PMI ease to 54.6 in April. In the euro area, the Manufacturing PMI receded to 55.5, the Consumer Confidence deteriorated to -22.0 and the Economic Sentiment retreated to 105, all for the month of April.

Later in the NA session, the final Manufacturing PMI is due followed by Construction Spending and the ISM Manufacturing.

What to look for around EUR

EUR/USD leaves behind part of the recent multi-session sharp selloff and rebounds from 5-year lows around 1.0470 (April 28). The outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by speculation the ECB could raise rates at some point around June/July, 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: Germany Retail Sales, Final Manufacturing PMI, Consumer Confidence, Economic Sentiment (Monday) – Germany Unemployment Rate, Unemployment Change, EMU Unemployment Rate, ECB Lagarde (Tuesday) – Germany Balance Trade, Final Services PMI, EMU Final Services PMI, Retail Sales (Wednesday) – Germany Factory Orders, Construction PMI (Thursday) – Germany Industrial Production (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is down 0.34% at 1.0505 and a break below 1.0470 (2022 low April 28) would target 1.0453 (low January 11 2017) en route to 1.0340 (2017 low January 3 2017). On the flip side, the next hurdle emerges at 1.0593 (high April 29) followed by 1.0936 (weekly high April 21) and finally 1.1000 (round level).