- EUR / USD loses more momentum and tests the 1.1740 region on Tuesday.
- The dollar remains firm thanks to higher yields on US bonds.
- Preliminary inflation figures for March in Germany stand out on today’s calendar.
The selling pressure around the common currency remains firm for another day and drags the EUR / USD pair to new yearly lows in the region of 1.1740.
EUR / USD focuses on data from Germany and the US.
The EUR / USD extends the downward movement in the first half of the week and moves through the zone of annual lows near 1.1740 due to the strength of the dollar and higher US yields.
In fact, the pair exacerbates their downfall after last week’s breakout of the critical 200-day SMA at 1.1862, which has now become the next immediate target for any occasional bullish attempt.
The downward movement in the pair occurs in the midst of new yearly highs in the dollar and US yields., rising to levels last recorded in January 2020 beyond 1.75%, all at the same time Backed by Reflation Trade and Vaccine Optimism along with recent news of Biden’s plan to increase spending on infrastructure later this year.
Regarding euro data, advanced German inflation figures for the month of March will occupy the central place of the economic calendar on Tuesday, followed by the preliminary Spanish CPI for the same period, as well as several indicators of sentiment and confidence from the eurozone in general.
Across the Atlantic, the Conference Board will release its consumer confidence indicator followed by housing data and speeches by R. Quarles of the FOMC, R. Bostic of the Atlanta Fed and J. Williams of the Mew York Fed.
What can we expect around the EUR?
EUR / USD remains under heavy pressure and falls back to new lows below the 1.1800 level. The sharp pullback in the pair came along with the persistent buying bias around the dollar, which has been weighing on the constructive view of the pair in recent weeks. The deterioration of morale in the eurozone, along with the slow pace of the vaccine launch in the region and the superior performance of the US economy compared to the other G-10 countries have been contributing to the renewed sales posture around to the common currency. However, the firm hand of the ECB (despite some verbal concerns) in combination with the expected rebound in economic activity in the region in the post-pandemic stage will likely prevent a much deeper pullback in the long-term pair.
Key events in the eurozone this week: Germany Preliminary CPI for March (Tuesday) – German Labor Market Report, Eurozone Preliminary CPI (Wednesday) – Germany Retail Sales, Eurozone Final PMI (Thursday).
Eminent Background Issues: Asymmetric economic recovery in the region. Sustainability of the rebound in inflation figures. Progress of the vaccine launch. Likely political turmoil around the EU Recovery Fund.
EUR / USD levels to watch out for
At the time of writing, the EUR / USD pair is shedding 0.22% on the day, trading at 1.1738. The next support awaits at 1.1740 (March 30 low), followed by 1.1574 (2008-2021 support line) and finally 1.1602 (November 4 low). On the upside, a breakout of 1.1862 (200-day SMA), would target 1.1989 (March 11 high) on its way to 1.2000 (psychological level).
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