EUR/USD: Breakout above 1.22 hinges on German IFO Expectations figure

EUR/USD's recovery rally will likely gather steam if a forward-looking German data beats estimates, overshadowing bearish macro factors. 

The German IFO Expectations index is seen rising to 93.2 in January from December's 92.8. The IFO Expectations released by the CESifo Group is an early indicator of current conditions and business expectations for the next six months. 

A big beat on expectations would indicate continued recovery amid the resurgent coronavirus concerns first signaled by Friday's above-forecast German Manufacturing PMI and strengthen the bid tone around the shared currency, lifting EUR/USD above 1.22. 

The coronavirus pandemic is showing no signs of slowing down. As per Reuters, investors are becoming skeptical about US President Joe Biden's ability to muster Republican support to deliver the proposed $1.9 trillion fiscal package. What's more, the Italy-German 10-year bond yield spread is rising and could have a bearing on the single currency. These factors could dent risk sentiment, strengthening the haven demand for the anti-risk dollar. As such, the bulls need the IFO data to beat expectations. 

The pair faced rejection near 1.2190 on Friday, forming a daily candle with a long upper wick, a sign of bull fatigue. 

Apart from the German IFO, speech by European Central Bank's President Christine Lagarde and policymaker Weidmann could also inject volatility into the euro markets. At press time, EUR/USD is trading lagely unchanged on the day near 1.2175.

Technical levels