- EUR / USD rally accelerates near the 1.2200 level.
- German 10-year yields fall to 5-month lows of around -0.23%.
- The German trade surplus widened to € 15.9 billion in April.
The common currency recovers the smile and raises EUR / USD near 1.2200 level during the European session on Wednesday.
EUR / USD strengthens ahead of the ECB
EUR / USD leaves Tuesday’s retracement behind and resumes rally with the next target at the round level of 1.2200 due to the renewed selling bias surrounding the US dollar.
The pair retakes the positive bias as the markets approach the key meeting of the ECB on Thursday. No changes in the interest rate are expected, although a possible announcement on the PEPP seems to be gaining ground in recent days.
In the meantime, the vaccination campaign maintains its steady pace in the Old Continent amid growing optimism about a strong economic recovery and despite new outbreaks of coronavirus cases in some countries.
Regarding the euro data, the German trade surplus expanded to 15.9 billion euros in April (from 14.3 billion) and the current account surplus fell to 21.3 billion euros during the same period (from 30.0 billion).
As for the US data, the weekly MBA mortgage applications, wholesale inventory data and the weekly EIA report will be released today.
What can we expect around the EUR?
Last week’s sell in EUR / USD found solid support around 1.2100. The subsequent bounce managed to retest the key 1.2200 level, leaving the outlook on the positive side, at least in the very short term. Looking at the broader scenario, the constructive outlook on the European currency remains and seems underpinned by the auspicious results of the bloc’s fundamental data, along with increased sentiment and the prospects for a strong rebound in economic activity in the Old Continent in the following months.
Key events in the eurozone this week: ECB meeting (Thursday).
Eminent Background Topics: Asymmetric economic recovery in the region. Sustainability of the rebound in inflation figures. Progress in the vaccination campaign. Likely political turmoil around the EU Recovery Fund. German elections. Investors’ shift to European equities.
EUR / USD levels
At the time of writing, the EUR / USD pair is gaining 0.11% on the day, trading at 1.2186. The next resistance is at 1.2266 (May 25 high), followed by 1.2300 (round level) and 1.2349 (January 6 high). On the other hand, a break below 1.2063 (23.6% Fibonacci retracement of the November-January movement), would target 1.2051 (May 13 low) en route to 1.1985 (May 5 low).
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