EUR/USD bounces off lows near 1.2170

The single currency regains the smile and lifts EUR/USD back to the area above 1.2200 the figure on Thursday.

EUR/USD capped by 1.2265/70

EUR/USD manages to quickly leave behind the earlier drop to the 1.2170 region, area coincident with a Fibo level (of the November-January rally) and retakes the 1.220 neighbourhood on the back of the resumption of the selling bias in the greenback.

The recent leg lower in the pair came in response to usual month-end flows in combination with the drop of the German Bund yields back to the -0.20% area, where are now attempting to stabilize.

In the meantime, investors’ attention remains on the progress of the vaccine rollout in the Old Continent along with rising optimism on growth prospects.

Earlier in the docket, the Italian Consumer Confidence improved to 110.2 for the current month and the German Consumer Climate receded to -7.00 for the month of June. Later in the session, ECB’s De Guindos, Hakkarainen, Schnabel, Elderson and Weidmann are all due to speak.

Across the pond, the centre of the debate will be on another revision of the Q1 GDP, Durable Goods Orders, the usual weekly Claims and Pending Home Sales.

What to look for around EUR

EUR/USD recorded new 4-month highs near 1.2270 on Tuesday before coming under some selling pressure the following session. The move remains largely underpinned by the improved sentiment in the risk appetite and the persistent sell-off in the greenback amidst rising optimism on the recovery in the euro area, which appears in turn supported by the firmer pace of the vaccine rollout. In addition, better-than-expected key fundamentals pari passu with the surging morale in the bloc also props up the upbeat mood surrounding the pair.

Key events in the euro area this week: ECB C.Lagarde speech, Final May Consumer Confidence (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections.

EUR/USD levels to watch

So far, spot is gaining 0.01% at 1.2192 and faces the next hurdle at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6). On the flip side, a break below 1.2051 (weekly low May 13) would target 1.1985 (monthly low May 5) en route to 1.1969 (200-day SMA).