EUR/USD regains the smile near 1.0960 ahead of key data

Fresh buying interest returns to the single currency and lifts EUR/USD to the 1.0960 zone on Tuesday.

EUR/USD now focuses on data

EUR/USD prints decent gains well north of the 1.0900 hurdle and manages to leave behind at the same time two consecutive daily pullbacks amidst increasing selling pressure surrounding the dollar.

In the meantime, expectations of further tightening by the ECB in May remain well on the cards for the time being. While investors appear tilted to a 25 bps rate raise for the time being, some ECB policy makers have opened the door to a larger rate increase in past sessions.

Later in the domestic calendar, the always relevant Economic Sentiment gauged by the ZEW institute for Germany and the euro bloc will take centre stage along with trade balance figures in the euro area.

Across the Atlantic, housing data and the speech by FOMC’s M. Bowman will be in the limelight later in the NA session.

What to look for around EUR

EUR/USD manages to gather some fresh upside traction following the recent retracement to the vicinity of the 1.0900 neighbourhood.

In the meantime, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany, EMU ZEW Economic Sentiment (Tuesday) - EMU Final Inflation Rate (Wednesday) – ECB Accounts, EMU Flash Consumer Confidence (Thursday) – Advanced Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.34% at 1.0960 and a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). On the flip side, the next support comes at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0756 (55-day SMA).