EUR/USD looks offered near 1.2160 ahead of ECB

EUR/USD fades Wednesday’s uptick and retests 1.2160.
The ECB meets later on Thursday with the PEPP in centre stage.
US CPI will grab all the attention in the NA session.

Pablo Piovano FXStreet

The single currency meets some mild selling pressure and drags EUR/USD back to the 1.2160 region in the second half of the week.

EUR/USD focused on the ECB

EUR/USD extends the choppy performance so far this week against the backdrop of increasing cautiousness among market participants ahead of key events later in the session.

In fact, the ECB is expected to keep a steady hand when comes to interest rates, although it could deliver some news regarding the PEPP. The latter has opened the door to some speculation about tapering by the central bank.

In the US, in the meantime, the buck keeps the bid bias ahead of the release of May’s inflation figures, which are seen well above the Fed’s target. In addition, the focus of attention will also be on the weekly claims.

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 are for 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 losing 0.09% at 1.2167 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 flip side, the next up barrier emerges at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).

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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