EUR/USD: Bulls lose faith near the 1.0600 zone

• EUR/USD trims gains and refocuses on the 1.0500 level.
• EMU flash CPI seen at 7.5% in April, GDP to expand 5% in Q1.
• US headline PCE rose 6.6% YoY, Core CPI gained 5.2% YoY in March.

The bullish attempt in EUR/USD appears to have bumped into a wall around the 1.0600 yardstick at the end of the week.

EUR/USD clings to gains on USD-selling

EUR/USD retreats from earlier highs near 1.0600 amidst some tepid rebound in the greenback, although the mood around the dollar remains tilted towards the bearish side on Friday.

Indeed, the pair manages well to capitalize on some profit taking around the buck, while the upbeat tone in German 10y bund yields also collaborates with the improvement in spot following Thursday’s drop to fresh 5-year lows around 1.0470.

Data wise in Euroland, the German economy is expected to expand at an annualized 3.7% in Q1, while preliminary figures for the euro area see the bloc growing 5% YoY in Q1 and headline CPI rising 7.5% in the year to April.

In the US data space, inflation tracked by the headline PCE rose 6.6% YoY in March and 5.2% when it comes to Core prices. In addition, Personal Income expanded 0.5% MoM and Personal Spending rose 1.1% MoM, both prints for the month of March. Later in the session comes the Chicago PMI and the final U-Mich Index for the month of April.

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, EMU Flash Q1 GDP Growth Rate, EMU Flash Inflation Rate (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. Second round of the presidential elections in France (April 24). Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.34% at 1.0533 and faces the next hurdle at 1.0593 (high April 29) followed by 1.0936 (weekly high April 21) and finally 1.1000 (round level). On the other hand, 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).