EUR/USD gathers traction and retests 1.2050, focus on the ECB

Following the inconclusive price action on Wednesday, EUR/USD now manages to resume the upside and re-visits the mid-1.2000s, or daily highs.

EUR/USD looks to the ECB

EUR/USD adds to the small advance recorded in the previous session on the back of the continuation of the selling bias surrounding the buck and the leg lower in US yields to new multi-week lows.

In fact, yields of the US 10-year reference navigate the area around 1.53%, levels last seen in early March, keeping well and sound the monthly decline from peaks beyond 1.77% (March 30).

In the meantime, investors keep favouring the growth prospects in Europe, which are in turn underpinned by the firmer pace of the vaccine rollout while lending extra legs to the upbeat momentum in the risk complex.

Later in the session, the ECB is expected to keep its monetary conditions unchanged, albeit positively assessing the performance of the economic recovery and keeping the upbeat tone when comes to growth prospects in the next months. At the Lagarde’s press conference, the debate is seen gyrating around the PEPP.

In the euro docket, the European Commission will publish its preliminary gauge of the Consumer Confidence for the current month.

In the US data space, the usual weekly Claims are due seconded by the Chicago Fed National Activity Index, Exiting House Sales and the Leading Index tracked by the CB.

What to look for around EUR

EUR/USD moved to fresh peaks around 1.2080 before losing some traction amidst the resurgence of dollar demand and volatility on fresh coronavirus woes. The continuation of the rally has been so far supported by the renewed offered bias in the dollar along with the investors’ shift to the growth prospect in Europe now that the vaccine campaign appears to have gained some serious pace. In addition, solid results from key fundamentals and the improvement in the sentiment in the euro area as of late also appear to bolster the momentum surrounding the single currency.

Key events in the euro area this week: ECB interest rate decision, President Lagarde’s press conference, European Commission advanced Consumer Confidence (Thursday) – Flash April PMIs, ECB Lagarde speech (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.

EUR/USD levels to watch

At the moment, the index is gaining 0.10% at 1.2046 and faces the next hurdle at 1.2079 (monthly high Apr.20) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6). On the other hand, a breach of 1.1955 (50-day SMA) would target 1.1916 (200-day SMA) en route to 1.1762 (78.6% Fibo of the November-January rally).