EUR/USD targets 1.2100, ECB Minutes, US Retail Sales in focus

EUR/USD picks up bids, firmer for the second consecutive day, around 1.2085 while heading into Friday’s European session. The currency major pair refreshed weekly low during early Thursday before bouncing off the key support line near 1.2045, backed by the market’s rethink over the Fed’s tapering. Extending the moves during today’s Asian session are the hopes of upbeat ECB minutes for the April meeting versus cautious sentiment over the US Retail Sales for the said month.

EU can ignore inflation fears, for now…

Fed policymakers’ demand for multiple months and more data to assent reflation fears favored the market mood the previous day despite the upbeat US Producer Price Index (PPI) for April. Also on the positive, the side was the 14-month low Jobless Claims.

At home, the European Central Bank (ECB) policymaker Yannis Stournaras noted on Thursday that markets show an increase in inflation expectations but added that inflation worries in Europe are not the same as in the US, per Reuters. This helped the regional currency traders to stay optimistic even as recent fears from the prices probes recovery moves.

The ECB policymakers are not only less worried about inflation but also hope for a stronger recovery in 2021 and 2022, per the latest economic forecast. Though, the bloc accepts that the pick-up seems to lag behind the UK.

Elsewhere, worsening virus conditions in Japan and India offers new challenges of the virus strain, recently convened by the UK. Also on the risk-negative side are the headlines from Gaza and the Brexit chatters that said “the European Union (EU) citizens in the UK are blocked,” per The Guardian.

Amid these plays, US bond yields remain pressured while those from Germany hold onto recovery moves from the 26-month low marked the previous day. However, stock futures remain mildly bid following the previous day’s upbeat performance, the first in a week.

Going forward, the ECB Monetary Policy Meeting Accounts will be the first catalysts to direct EUR/USD moves, other than the risk factor, ahead of the US Retail Sales for April, expected 1.0% versus 9.7% MoM prior. Also in the pipeline are the preliminary readings of the Michigan Consumer Sentiment Index for May, forecast 90.4 versus 88.3.

Although the ECB left its monetary policy unchanged in the last two meetings, the tone of the statement and press conference seem to draw a bullish scenario, which if confirmed in today’s ECB minutes, could back EUR/USD bulls. Meanwhile, downbeat US data becomes necessary for the currency pair to remain firm.

Technical analysis

Sustained bounce off 2.5-month-old ascending support line keeps EUR/USD buyers hopeful to revisit 1.2130 hurdle ahead of challenging the monthly peak near 1.2180. In a case where the quote drops below the stated trend line support, near 1.2060, the 100-day SMA level around 1.2040 and the 1.2000 threshold act as additional downside filters.