EUR/USD comes under selling pressure near 1.2170 ahead of ZEW

The European currency now faces some downside pressure and drags EUR/USD to daily lows in the 1.2170 zone.

EUR/USD offered ahead of key data

EUR/USD fades part of the recent weekly upside and gives away some gains following Monday’s brief visit to the key 1.2200 neighbourhood.

The mood surrounding the pair remains cautious ahead of crucial US inflation figures and the ECB monetary policy meeting, both scheduled for Thursday. Furthermore, the economic recovery narrative in the Old Continent appears somewhat priced in for the time being, with investors shifting their attention to the potential future steps from the ECB.

In the meantime, yields of the German 10-year Bund remain within the familiar range, while its American peer keeps navigating a consolidative pattern around 1.56%.

Later in the session, the German ZEW survey is due seconded by another revision of EMU Q1 GDP and quarterly labour market figures in the region.

What to look for around EUR

Last week’s sell-off in EUR/USD met solid support around the 1.2100 neighborhood. The subsequent bounce manages to re-test the key 1.2200 level, leaving the perspective on the positive side at least in the very near-term. Looking at the broader scenario, the constructive perspective in the European currency stays in place and appears propped up by auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity in the Old Continent in the months to come and the investors’ appetite for riskier assets.

Key events in the euro area this week: EMU Advanced Q1 GDP, German ZEW survey (Tuesday) – ECB meeting (Thursday).

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. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is losing 0.15% at 1.2171 and a break below 1.2063 (23.6% Fibo retracement of the November-January rally) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5). On the upside, next hurdle is located at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).