EUR/USD resumes the downside and approaches 1.2000 on USD-strength

  • EUR/USD loses the grip and trades close to 1.2000.
  • Bund 10-year yields recedes further from recent tops.
  • Focus will be on the US docket: Factory Orders, Balance of Trade.

Sellers regain the upper hand around the European currency and push EUR/USD back to the vicinity of the psychological support in the 1.2000 neighbourhood on Tuesday.

EUR/USD stays supported around 1.20, for now

EUR/USD fades the optimism seen at the beginning of the week and abandons the area of Monday’s tops around 1.2080, re-shifting the focus to the lower bound of the range near 1.20 the figure.

In the meantime, yields of the German 10-year Bunds retreats from Monday’s over-a-year peaks around -0.16%, returning to the -0.20% zone so far on Tuesday. The moderate uptick in spot was also sustained by comments from ECB’s Vice-President L.De Guindos, who said that the central bank could start phasing out current stimulus measures once the vaccine rollout picks up sustained pace and the economic recovery gathers further steam.

Absent data releases in the euro area, the US calendar will take centre stage with the Factory Orders, the IBD/TIPP Index, trade balance figures and the usual weekly API report due for release later in the NA session.

What to look for around EUR

The April rally in EUR/USD met strong resistance around 1.2150 (April 29), sparking a corrective downside to the proximity of the critical 1.2000 neighbourhood afterwards. The strong advance in the pair recorded in past weeks was sustained by the persevering selling bias surrounding the greenback, which gained extra pace following the dovish tone from the latest FOMC event. 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 monthly highs round 1.2150 so far).

Key events in the euro area this week: Final Services, Composite PMIs (Wednesday) – ECB’s Lagarde speech (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 0.49% at 1.2003 and a breach of 1.1993 (low Apr.22) would target 1.1939 (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 1.2150 (monthly high Apr.29) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6).

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