EUR/USD keeps the bearish note unchanged around 1.0850

EUR/USD has quickly left behind Monday’s bullish attempt and resumes the downtrend in the mid-1.0800s on turnaround Tuesday.

EUR/USD looks to US data, USD

EUR/USD returns to the negative territory after Monday’s daily gains and quickly re-shifts the attention to the area of recent lows near 1.0830 (April 8). It is worth noting that the pair have lost ground in eight out of the last nine sessions and so far retreats nearly 3% since the March 31 tops in the 1.1180/85 band.

The pair’s retracement continues to follow the sharp rally in the greenback, which appears in turn reinforced by the equally intense advance in US yields across the curve. The latter is also underpinned by the firm prospects for a tighter rate path by the Fed, including a potential back-to-back 50 bps rate hike at the May and June gatherings.

In the German debt market, the 10y bund yields slowly approach the 0.90% area for the first time since July 2015.

In the docket, Germany Economic Sentiment gauged by the ZEW institute came a tad above estimates at -41 for the current month. Still in Germany and earlier in the session, final inflation figures showed the CPI rise 2.5% MoM in March and 7.3% over the last twelve months.

Across the pond, the publication of inflation figures for the month of March will be the salient event seconded by the NFIB Index, the IBD/TIPP Index and speeches by Barkin and Brainard.

What to look for around EUR

Sellers continue to rule the sentiment around EUR/USD, which extended the downtrend to fresh lows in the vicinity of 1.0830 at the end of last week. The multi-session negative performance of the pair comes in response to the firmer pace of the greenback and renewed geopolitical concerns. As usual, pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a rebound in the euro.

Key events in the euro area this week: Germany Final Inflation Rate, ZEW Economic Sentiment (Tuesday) – ECB Interest Rate Decision (Thursday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Second round of the presidential elections in France. Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is down 0.13% at 1.0869 and a breakdown of 1.0836 (monthly low April 8) would target 1.0805 (2022 low March 7) en route to 1.0766 (monthly low May 7 2020). On the flip side, immediate resistance comes at 1.0933 (weekly high April 11) seconded by 1.1000 (round level) and finally 1.1131 (55-day SMA).