- EUR / USD is down from daily highs near 1.1750 on Wednesday.
- The EMU flash CPI stood at 0.9% MoM, 1.3% YoY in March.
- The US ADP report disappointing expectations of 517,000 last month.
After hitting daily highs near 1.1750, the EUR/USD it encountered some selling pressure and is now back at the 1.1720 zone, rising modestly so far this day.
EUR / USD bounces from yearly lows near 1.1700
EUR / USD so far manages to reverse the recent sharp drop at the 1.1700 zone, or new 2021 lows, recorded during early trading on Wednesday.
Despite the current rally, the single currency remains under pressure as investors continue to favor the dollar due to rising US yields, the strong US economic recovery supported by the launch of vaccines and firm prospects for higher fiscal spending in the coming months.
On another front, ECB President C. Lagarde “challenged” markets early Wednesday after hinting at the idea that the central bank is ready to face investor tests. He also stressed that the ECB will give sufficient notice before any modification of the stimulus measures underway.
In the domestic calendar, the German Unemployment Rate remained at 6.0% and the Unemployment Change fell by 8,000, all for the month of March. In other data, preliminary EMU inflation figures now expect the headline CPI to rise 0.9% month-on-month and 1.3% year-on-year through March.
Across the ocean, ADP’s report missed estimates at 517K over the past month.
What to look for around EUR
EUR / USD finds decent support at the 1.1700 zone so far this week. The sharp pullback in the pair came alongside the dollar’s lingering supply bias, which has been undermining the pair’s constructive outlook in recent weeks. The deterioration of morale in the euro zone, along with the slow pace of the launch of the vaccine in the region and the superior performance of the US economy (compared to its G10 peers) have been contributing to the renewed position offered on the single 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 levels
At the moment, the index is gaining 0.16% at 1.1732 and a breakout of 1.1864 (200-day SMA) would target 1.1989 (weekly high on March 11) on its way to 1.2000 (psychological level). On the other hand, the next support emerges at 1.1704 (March 31, 2021 low), followed by 1.1602 (November 4, monthly low) and finally 1.1572 (2008-2021 support line).
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