EUR/USD looks firmer and climbs to 12-month highs near 1.1060

EUR/USD gathers extra pace and pokes with 1.1060.
Industrial Production in the euro area surprised to the upside.
US Producer Prices, weekly Claims came below consensus.

Pablo Piovano FXStreet

The upside momentum in the single currency and around the risk complex in general lifts EUR/USD to new highs near 1.1060 on Thursday.

EUR/USD: Next on the upside comes 1.1100

EUR/USD keeps the bid stance well and sound for the third session in a row on Thursday and trades in levels last seen around a year ago on the back of the unabated sell-off in the dollar.

Indeed, the greenback saw its decline gather extra impulse after US Producer Prices unexpectedly contracted 0.5% MoM in March, while weekly Initial Claims kept thew recent uptrend in place after rising more than estimated by 239K in the week to April 8.

Extra weakness in the dollar also comes in response to declining US yields in the short end and the belly of the curve, while expectations of a 25 bps rate hike by the Fed in May has been somewhat trimmed in the wake of US results.

Earlier in the domestic calendar, final inflation figures in Germany showed the CPI rose 7.4% in the year to March and 0.8% vs. the previous month, while Industrial Production in the broader Euroland expanded more than expected 2.0% YoY in February.

What to look for around EUR

EUR/USD advances well past the 1.1000 mark and records new YTD peaks on Thursday.

In the meantime, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany Final Inflation Rate, EMU Industrial Production (Thursday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.60% at 1.1057 and a break above 1.1100 (round level) would target 1.1184 (weekly high March 21 2022) en route to 1.1200. On the flip side, the next support comes at 1.0788 (monthly low April 3) followed by 1.0750 (55-day SMA) and finally 1.0712 (low March 24).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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