EUR/USD gathers traction and approaches 1.2200

The single currency now regains the smile and lifts EUR/USD to the vicinity of the 1.2200 mark on Wednesday.

EUR/USD looks bid ahead of ECB

EUR/USD leaves behind Tuesday’s pullback and resumes the upside with the next target at 1.2200 the figure on the back of the renewed selling bias surrounding the greenback.

The pair retakes the positive stance as markets get closer to the key ECB meeting on Thursday, with consensus expecting no changes of the interest rate although a potential announcement regarding the PEPP seems to be gathering some favour as of late.

Meanwhile, the vaccination campaign keeps its firm pace unabated in the Old Continent amidst rising optimism on a strong economic recovery and despite new bouts of coronavirus cases in some countries.

Earlier in the euro docket, the German trade surplus expanded to €15.9 billion in April (from €14.3 billion) and the Current Account surplus shrank to €21.3 billion during the same period (from €30.0 billion).

Data wise in the US docket, the weekly Mortgage Applications by MBA are due seconded by Wholesale Inventories and the weekly EIA’s report.

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 managed 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: 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 gaining 0.11% at 1.2186 and faces the next up barrier at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6). On the flip side, 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).