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  • EUR/USD deflates from daily highs near 1.1750 on Wednesday.
  • EMU’s flash CPI came in at 0.9% MoM, 1.3% YoY in March.
  • US ADP report missed expectations at 517K last month.

After hitting daily tops near 1.1750, EUR/USD met some selling pressure and now returns to the 1.1720 area, up smalls for the day so far.

EUR/USD bounces off YTD lows near 1.1700

EUR/USD so far manages to reverse the recent strong downside to the 1.1700 neighbourhood, or fresh 2021 lows, recorded during early trade on Wednesday.

Despite the current rebound, the single currency stays under pressure, as investors continue to favour the dollar on the back of rising US yields, the US strong economic recovery supported by the firm vaccine rollout and prospects of higher fiscal spending in the next months.

On another front, ECB’s Chairwoman C.Lagarde “challenged” markets earlier on Wednesday after hinting at the idea that the central bank is ready to face investors’ tests. She also stressed that the ECB will give sufficient notice before any modification of the ongoing stimulus measures.

In the domestic calendar, the German Unemployment Rate stayed at 6.0% and the Unemployment Change went down by 8K, all for the month of March. Further data saw EMU’s preliminary inflation figures now expecting the headline CPI to rise 0.9% inter-month and 1.3% on a year to March.

Across the ocean, the ADP report came in short of estimates at 517K during last month.

What to look for around EUR

EUR/USD meets some decent support in the 1.1700 neighbourhood so far this week. The strong pullback in the pair came along the persistent bid bias 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 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 gaining 0.16% at 1.1732 and a breakout of 1.1864 (200-day SMA) would target 1.1989 (weekly high Mar.11) en route to 1.2000 (psychological level). On the flip side, the next support emerges at 1.1704 (2021 low Mar.31) seconded by 1.1602 (monthly low Nov.4) and finally 1.1572 (2008-2021 support line).