EUR/USD looks offered, turns negative around 1.2150

EUR/USD fades the initial optimism and now recedes to the area of daily lows near 1.2150.

EUR/USD keeps the focus on the ECB

EUR/USD starts the week on the back footing and retreats to the mid-1.2100s following Friday’s advance to the area beyond the 1.2200 yardstick, all in response to the disappointing Payrolls figures for the month of May (+559K).

The move lower in the European currency comes in tandem with the drop in yields of the German 10-year benchmark to the -0.21% area.

In the meantime, investors’ attention is now expected to gyrate to the ECB event on Thursday - with discussions around the current PEPP in the limelight - and US inflation figures tracked by the CPI for the month of May.

In the euro docket, German Factory Orders contracted 0.2% vs. the previous month in April. Earlier in the Asian trading hours, the Chinese trade surplus widened to $45.53 billion in May, coming in short of estimates. Later in the broader Euroland, the Sentix Index for the current month is due.

Across the pond, the Consumer Credit figures will be the sole release in the NA session.

What to look for around EUR

Last week’s sell-off in EUR/USD looks contained around the 1.2100 neighborhood for the time being. The recent knee-jerk in spot appears temporary, however, all amidst the constructive perspective in the European currency, which in turn appears propped up by auspicious results from fundamentals in the region 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: EMU Advanced Q1 GDP, German ZEW survey (Tuesday) – 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 0.08% at 1.2156 and a break below 1.2064 (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 upside, next hurdle is located at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).