EUR/USD tumbles to fresh lows in the sub-1.2200 area

  • EUR/USD loses the grip and breaks below 1.2200.
  • German Retail Sales contracted 5.5% MoM in April.
  • ECB’s C.Lagarde is due to speak later in the session.

Sellers now retake the upper hand and drag EUR/USD to fresh 3-day lows in the 1.2180 region on Wednesday.

EUR/USD weaker on dollar recovery

EUR/USD extends the corrective downside and adds to Tuesday’s losses on the back of the improved sentiment around the greenback and despite auspicious data releases in the domestic docket.

In fact, solid prints from May final PMIs and higher-than-expected inflation figures in Euroland released earlier in the week failed to lend sustainable wings to the pair, which in turn remains immersed into the cautious tone ahead of the key US Nonfarm Payrolls for the month of May due on Friday.                                                               

Earlier on Wednesday, the German Retail Sales contracted 5.5% in May vs. the previous month and expanded 4.4% over the last twelve months. In the broader euro area, Producer Prices surprised to the upside and gained 1.0% MoM and 7.6% on a year to April.

Later in the session, ECB’s Board member F.Elderson will participate in a discussion panel ahead of the speech by Chairwoman C.Lagarde.

Across the pond, MBA Mortgage Applications are due seconded by the IBD/TIPP Index, the API’s weekly report and speeches by FOMC’s Bostic, Evans and Harker.

What to look for around EUR

EUR/USD once again met sellers near the 1.2250 area and now recedes to the 1.2170 zone, where sits the 20-day SMA. The prevailing better mood in the euro remains largely underpinned by the improved sentiment in the risk appetite and the perseverant bearish stance in the greenback, all amidst rising optimism on the recovery in the euro area, which appears in turn supported by the firmer pace of the vaccine rollout. In addition, better-than-expected key fundamentals pari passu with the surging morale in the bloc also props up the upbeat mood surrounding the pair.

Key events in the euro area this week: ECB Lagarde (Thursday) – Germany/EMU Final Composite PMI.

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 0.19% at 1.2189 and a break below 1.2132 (low May 28) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5). On the upside, next hurdle is located at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).

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