EUR/USD Trims Gains And Returns To 1.1020, As US Dollar Recovers

Fresh selling pressure now drags EUR/USD to the low-1.1000s on the back of some tepid recovery in the dollar on Tuesday.

EUR/USD Continues To Target 2023 High

EUR/USD now succumbs to the better mood around the dollar and snaps three consecutive sessions with gains on Tuesday.

Despite the knee-jerk, the pair remains poised to continue the uptrend in the short-term horizon. Indeed, this view remains underpinned by firmer speculation that the ECB will raise the policy rate in June and July, which appears propped up by the unabated hawkish narrative from ECB’s rate-setters.

The absence of data releases in the euro docket on Tuesday will surely leave the attention to the US calendar, where the Consumer Confidence tracked by the Conference Board will be at the center of the debate seconded by New Home Sales and the FHFA’s House Price Index.

What To Look For Around EUR

Renewed weakness now prompts EUR/USD to retreat from recent peaks in response to some signs of life from the greenback.

Meanwhile, price action around the single currency should closely follow dollar dynamics and the Fed-ECB divergence regarding the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continues to favor further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro group Meeting, Germany labor market report/ Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (Friday).

Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine War on the region’s growth prospects and inflation outlook. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is losing 0.16% at 1.1027 and faces the next support at 1.0909 (weekly low April 17), seconded by 1.0831 (monthly low April 10) and finally 1.0788 (monthly low April 3). On the upside, a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21, 2022).

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