EUR/USD weaker, challenges 1.2100 on stronger dollar, yields

EUR/USD remains under pressure and now flirts with a potential visit to the 1.2100 neighbourhood.

EUR/USD offered following monthly highs

EUR/USD interrupts two consecutive days with gains and now meets some downside pressure despite the initial uptick to new monthly levels in the 1.2150 region.

The corrective downside in the pair comes on the back of the pick-up in the buying interest around the dollar, in turn sustained by the strong bounce in US yields. In fact, yields of the us 10-year note climb to new 2-week highs in the vicinity of 1.70%, fading the post-FOMC pullback to the vicinity of 1.60%.

Earlier in the session and in the euro docket, the German Unemployment Change rose by 9K in April, while the jobless rate stayed unchanged at 6.0%.  Still in Germany, flash CPI is seen rising 0.7% MoM and 2.0% YoY in April. In the broader euroland, the final Consumer Confidence came in at -8.1 (unchanged from the preliminary data).

Across the pond, the US economy is expected to expand at an annualized 6.4% in Q1, as per flash GDP figures. Initial Claims, additionally, rose by 553K from a week earlier.

What to look for around EUR

EUR/USD’s upside momentum reached the 1.2150 level before losing some vigour on Thursday, always against the broader backdrop of the persevering selling bias surrounding the greenback, which gained extra pace following the dovish tone from the FOMC event (Wednesday). 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: German flash April CPI (Thursday) – German, EMU advanced Q1 GDP, EMU flash April CPI.

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.

EUR/USD levels to watch

So far, spot is losing 0.15% at 1.2106 and a breach of 1.1993 (low Apr.22) would target 1.1933 (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).