EUR/USD looks weaker, loses the grip and retreats to 1.2230

The single currency accelerates the downside and motivates EUR/USD to slip back to the 1.2240/30 region on Wednesday.

EUR/USD upside capped near 1.2270

EUR/USD corrects lower after clinching new monthly highs in the 1.2265/70 band on Tuesday and at the same time fades the optimism seen in the first half of the week.

The recovery in the dollar plus some profit taking in the risk-associated universe collaborates with the selling bias in the pair. In the same line, yields of the German 10-year reference return to the -0.20% region after advancing to the -0.07% area during last week.

In the data space, French Consumer Confidence ticked higher to 97 for the month of May (from 95). Across the pond, MBA Mortgage Applications and the EIA’s weekly report on crude oil inventories come up next along with the speech by FOMC’s R.Quarles.

What to look for around EUR

EUR/USD recorded new 4-month highs near 1.2270 on Tuesday. The move remains largely underpinned by the improved sentiment in the risk appetite and the persistent sell-off in the greenback amidst rising optimism on the recovery in the euro area, which appears in turn supported by the firmer pace of the vaccine rollout. In addition, better-than-expected key fundamentals pari passu with the surging morale in the bloc also props up the upbeat mood surrounding the pair.

Key events in the euro area this week: German GfK Consumer Climate (Thursday) - Final May Consumer Confidence (Friday).

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.

EUR/USD levels to watch

So far, spot is losing 0.10% at 1.2235 and a break below 1.2051 (weekly low May 13) would target 1.1985 (monthly low May 5) en route to 1.1968 (200-day SMA). On the other hand, the 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).