EUR/USD clings to gains near 1.0600 amid relentless USD selling, German IFO eyed

EUR/USD is consolidating the latest gains below 1.0600, as the selling interest around the US dollar remains unabated amid a cautious market mood.

The dollar is extending its corrective decline from two-decade highs reached against its major rivals, as investors continue repositioning ahead of Wednesday’s FOMC May meeting’s minutes.

Asia opened the week on a firmer footing, despite the tech sell-off on Wall Street last Friday, as investors cheered hopes for China’s growth rebound amid the reopening optimism.

Although the optimism was met with the news of record covid cases reported in Beijing, which revived the lockdown concerns. Also, China witnessed tech selling, weighing negatively on the market’s risk perception.

The shared currency finds some support from the recent hawkish ECB commentary, with policymakers hinting towards a July rate hike. Over the weekend, ECB President Christine Lagarde said the first increase in interest rates in more than a decade may come in July. Lagarde, however, downplayed the idea of a half-point move amid growth fears.

On the other hand, the further upside in EUR/USD seems to be capped by the rise in the US Treasury yields, as traders continue to thrive on the hawkish Fed expectations. The world’s most powerful central bank still remains ahead of the curve even though hopes for a 75 bps June rate hike fade.

Looking ahead, the pair now awaits the German IFO Survey for May, with the headline Business Climate index expected to arrive at 91.4 vs. 91.8 previous. The US docket remains data-light, with all eyes on the broader market sentiment.

EUR/USD: Technical levels to consider