EUR/USD climbs to 2-day highs near 1.2050

Fresh buying pressure now pushes EUR/USD to fresh 2-day peaks near the 1.2050 region on Thursday.

EUR/USD up on USD-selling

EUR/USD reverses two consecutive daily pullbacks and comes back after bottoming out in the vicinity of 1.1980 on Wednesday.

In fact, sellers have re-emerged around the dollar following dovish (ish) comments from Fed speakers on Wednesday, while the steady performance of US yields is not helping the buck either.

Indeed, FOMC’s Rosengren, Mester and Evans coincided on Wednesday that it is still premature to start talking about tapering the bond-purchase programme despite the strong economic recovery. In addition, they all coincided in that bouts of higher inflation should be deemed as temporary for the time being.

In the meantime, US 10-year yields trade within a side-lined theme around 1.57% and yields of the German 10-year reference follow the same patter around -0.24%.

In the euro calendar, Retail Sales in the broader Euroland expanded at a monthly 2.7% in March and 12% from a year earlier. Later in the session, Board member af Jochnick will participate in a BIS event, Vice-President Luis De Guindos will attend a Q&A session at the EY Insights Forum Economics and Chairwoman Christine Lagarde will speak at a virtual conference on “Corporate Sustainability Reporting Directive-the way forward”, organized by the European Commission.

What to look for around EUR

EUR/USD rebounds from the 1.1985/80 band and looks to reclaim the area north of the psychological 1.20 yardstick. Despite the ongoing corrective downside in the pair, the outlook for the single currency stays constructive on the back of the investors’ shift to the improved growth outlook in the Old Continent now that the vaccine campaign appears to have gained some serious pace and solid results from key fundamentals pari passu with the surging morale in the bloc.

Key events in the euro area this week: ECB’s Lagarde speech (Thursday and 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 0.31% at 1.2041 and faces the next up barrier at 1.2150 (monthly high Apr.29) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6). On the other hand, a breach of 1.1985 (monthly low May 5) would target 1.1942 (200-day SMA) en route to 1.1887 (61.8% Fibo of the November-January rally).