• Comfortably above 1.2100 amid USD consolidation and light trading.
  • Eyes on US-German yield differential ahead of inflation figures, Fed.

The EUR/USD pair kicked-off the week on a quiet note, as holiday-thinned markets left the rates fluctuating between gains and losses well above the 1.21 handle, as investors await fresh impetus from the sentiment on the European open ahead of the German Prelim CPI release.

The spot extends its consolidative mode into Asia, having staged a solid recovery from three-month lows of 1.2056 reached in the mid-European session last Friday after the US dollar clocked fresh multi-month tops versus its major rivals.

The USD index spiked to 91.98 levels in tandem with the 10-year Treasury yields after the US Q1 advance GDP numbers topped estimates, coming in at 2.3% q/q vs. 2.0% expectations.

Looking ahead, the major will continue to get influenced by the widening US-DE (German) 10-year yield spread, which sits at the highest levels since 1989 amid divergent monetary policy and inflation outlooks between the Fed and ECB.

Calendar-wise, the focus remains on the German Prelim CPI, dropping in at 12 GMT ahead of the US Core PCE price index and personal spending among other minority reports. The main event risks for this week are likely to be the FOMC policy decision and payrolls, both of which could throw fresh light on the June Fed rate hike prospects.

EUR/USD levels to watch

FXStreet’s Chief Analyst, Valeria Bednarik explains: “A test of the mentioned 1.2160 seems likely, but if sellers reject it from there, lower lows should be expected. In the 4 hours chart, the 20 SMA presents a strong downward slope, converging with the mentioned Fibonacci resistance, while technical indicators corrected extreme oversold readings but stand well below their mid-lines, somehow suggesting that another leg higher is possible as corrective, but overall that the dominant bearish trend is still strong. Support levels: 1.2100 1.2060 1.2020. Resistance levels: 1.2160 1.2200 1.2245.”

 

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