- EUR/USD picks up extra pace and revisits the 1.0870 area.
- The dollar remains on the defensive near the 99.50 level.
- Advanced German flash CPI figures next of relevance in the docket.
The single currency has resumed the upside following Tuesday’s volatile session and is now motivating EUR/USD to re-test the 1.0870 region on Wednesday.
EUR/USD looks to data, risk, dollar
EUR/USD is posting decent gains on Wednesday, managing to regain the upper end of the weekly range following Tuesday’s failed attempt to reclaim the 1.0900 neighbourhood.
Once again, the soft note surrounding the buck is sustaining the bounce in the pair. This, at the same time, is helped by positive headlines from France, Spain and Italy regarding a somewhat clearer path towards the re-opening of the economic activity and the return to the normal (ish) life in the eventual coronavirus aftermath.
Data wise in Euroland, the most salient event will be the flash inflation figures in Germany for the month of April seconded by sentiment/confidence gauges in the broader euro zone. Earlier in the session, German Import Prices contracted 3.5% MoM during March, coming in short of estimates. Still in the region, the ECB’s M3 Money Supply expanded more than expected 7.5% on a year to March and Private Sector Loans expanded 3.4% over the last twelve months.
Across the Atlantic, all eyes will be on the FOMC meeting and particularly on any changes in the Fed’s forward guidance in light of the ongoing lockdown and prospects of a sharp contraction of the US economy.
What to look for around EUR
The euro extends the recovery from recent lows and is now shifting its focus to the 1.0900 region. As always, developments from the coronavirus and its impact on the economy are expected to keep ruling the sentiment in the global markets for the time being, while optimism on a gradual re-start of the economic activity in some members of the bloc has given extra oxygen to the single currency as of late. On the more macro view, the euro is expected to remain under scrutiny in light of the predicted contraction of the bloc’s economy in the first half of the year, relegating hopes of a potential recovery to Q3 and/or Q4.
EUR/USD levels to watch
At the moment, the pair is gaining 0.45% at 1.0867 and a break above 1.0888 (weekly high Apr.28) would target 1.0943 (55-day SMA) en route to 1.0990 (weekly/monthly high Apr.15). On the flip side, immediate contention is located at 1.0814 (78.6% Fibo of the 2017-2018 rally) seconded by 1.0727 (weekly low Apr.24) and finally 1.0635 (2020 low Mar.23).
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