- EUR/USD extends the consolidation above 1.2050 on Wednesday.
- Higher US yields lend extra support to the recovery in the dollar.
- The FOMC meeting will be the salient event later on Wednesday.
The single currency extends the choppy activity so far this week and now motivates EUR/USD to recede to the 1.2070 zone after failing to re-visit the 1.2100 mark earlier in the session.
EUR/USD stays offered ahead of Fed
EUR/USD fades Tuesday’s advance and returns to the negative territory, although it has once again met decent contention in the 1.2050 area for the time being.
The better note in the buck comes in tandem with the bounce in US yields, which manage to stage a moderate comeback following recent lows.
The mild bias towards the risk aversion has undermined the recent upside momentum in the pair and the rest of the risk complex, all in response to the quick surge in coronavirus cases in Asia and particularly in India and Japan.
In the euro calendar, the German Consumer Confidence tracked by GfK receded to -8.8 for the month of May (from -6.1), while Consumer Confidence in France stayed unchanged at 94 in April.
Across the pond MBA will publish its weekly Mortgage Applications figures followed by advanced Goods Trade Balance results, the flash Wholesale Inventories for the month of March and the EIA’s weekly report on crude oil supplies.
The FOMC finishes its 2-day meeting later in the European evening. The Committee is expected to keep the Fed Funds Target Range and the broad monetary conditions unchanged. Despite Powell’s press conference is forecast to deliver an upbeat assessment on the economy, the main message is predicted to keep the loose stance and deem any taper speculation as premature.
What to look for around EUR
EUR/USD met some decent resistance in the low 1.2100s so far, always against the broader backdrop of the persevering selling bias surrounding the greenback. Also propping up the better mood in the European currency appears the investors’ shift to the improved growth outlook in the Old Continent now that the vaccine campaign appears to have gained some serious pace. In addition, solid results from key fundamentals pari passu with the surging morale in the bloc also collaborate with the monthly recovery in the pair (from the vicinity of 1.1700 to the boundaries of 1.2100 so far).
Key events in the euro area this week: German labour market report, flash April CPI (Thursday) – German, EMU advanced Q1 GDP, EMU flash April CPI.
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
So far, spot is losing 0.13% at 1.2074 and a breach of 1.1993 (low Apr.22) would target 1.1930 (200-day SMA) en route to 1.1887 (61.8% Fibo of the November-January rally). On the other hand, the next hurdle emerges at 1.2116 (monthly high Apr.26) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6).
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