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  • EUR/USD trades on the defensive below the 1.18 level.
  • The dollar resumes the upside despite lower yields.
  • Investors’ attention will be on inflation figures in Euroland.

Sellers appear to have returned to the single currency and keep EUR/USD under pressure below the 1.1800 yardstick so far at the beginning of the week.

EUR/USD looks to the pandemic, vaccine rollout

EUR/USD partially fades Friday’s advance and remains under pressure, always below the key 1.1800 neighbourhood.

The bid tone around the greenback keeps the pair under downside pressure and extends the multi-day leg lower for yet another session on Monday.

The unabated progress of the pandemic in the Old Continent coupled with the slow pace of the vaccine rollout and fresh lockdown restrictions in many economies of the region continue to weigh on the investors’ sentiment and expose the European currency to further pullbacks in the short-term horizon.

Absent data releases in the euro docket on Monday, market participants will closely follow the publication of preliminary inflation figures in Germany and Euroland later in the week.

Data across the pond only include the Dallas Fed Index, while FOMC’s C.Waller will participate in a discussion on the “Federal Reserve Independence”.

What to look for around EUR

EUR/USD remains under heavy pressure despite Friday’s bounce off new yearly lows in the 1.1760 region. The strong pullback in the pair came along the persistent solid performance of the greenback, which has been undermining the constructive view in the pair in the past weeks. The deterioration of the morale in Euroland coupled with the poor pace of the vaccine rollout in the region and the outperformance of the US economy (vs. its G10 peers) have all been collaborating with the renewed offered stance around the single currency. However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair in the longer run.

Key events in the euro area this week: German March’s flash CPI (Tuesday) – German labour market report, EMU’s flash CPI (Wednesday) – German Retail Sales, final PMIs in the euro area (Thursday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund.

EUR/USD levels to watch

At the moment, the index is losing 0.20% at 1.1768 and faces the next support at 1.1761 (2021 low Mar.25) seconded by 1.1745 (low Nov.23 2020) and finally 1.1602 (monthly low Nov.4). On the upside, a breakout of 1.1989 (weekly high Mar.11) would target 1.2000 (psychological level) en route to 1.2025 (50-say SMA).