- EUR / USD rally loses momentum and is approaching 1.2200.
- The dollar appears to be strengthening thanks to higher yields from the United States.
- The final April CPI for the euro area reached 0.6% month-on-month in April.
- During the American session the minutes will be released to the FOMC.
After hitting new highs near the 1.2250 level at the start of the European session on Wednesday, EUR / USD is now facing some selling pressure and retreats near the 1.2200 support.
EUR / USD now faces resistance around 1.2250
The rise of the EUR / USD has encountered a stiff barrier near 1.2250 so far, prompting the current pullback to the 1.2215 / 10 region, all amid the dollar rally and rising yields.
The corrective drop in the pair occurs despite the fact that the yields of German 10-year bonds recover the zone of -0.07%, levels last seen in May 2019. Along the same lines, the 10-year US benchmark yields manage to extend the rebound to 1.67% so far this Wednesday. Still in the bond market, the vice president of the ECB, L. De Guindos, has said earlier in the day that current yield levels are favorable.
Regarding the euro area data, the Consumer Price Index of the euro zone for the month of April rose 0.6% monthly, as expected, while the interannual CPI increased by 1.6%, fulfilling forecasts. On the other hand, monthly subjacent inflation has grown by 0.5%, one tenth below the estimated 0.6%, while the interannual inflation has stood at 0.7%, below the expected 0.8%.
On the other side of the Atlantic, today the FOMC’s publication of the minutes stands out.
What can we expect around the EUR?
EUR / USD finally breaks above the key hurdle of 1.2200, amid the continued recovery from last week’s lows in the 1.2050 region, always supported by the strong rebound in 10-year German Bund yields. and the general optimistic tone in the appetite for risk. The pair’s sustained rally also comes in response to investors’ shift towards better growth prospects in the Old Continent now that the vaccination campaign appears to have gained serious pace, along with strong fundamental data from the region.
Key events in the eurozone this week: May Eurozone and Germany PMI and preliminary consumer confidence (Friday).
Eminent Background Issues: 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.
EUR / USD levels
At the time of writing, the EUR / USD pair is shedding 0.08% on the day, trading at 1.2212. A break below 1.2051 (May 13 low), would target 1.1985 (May 5 low) en route to 1.1957 (200-day SMA). On the upside, the next resistance is at 1.2245 (May 19 high), followed by 1.2300 (round level) and finally 1.2349 (January 6 high).
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