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  • EUR/USD trades within a narrow range near the 1.22 level.
  • Global markets remain in a consolidative mood on Monday.
  • German flash inflation figures for the month of May next on tap.

The single currency trades without a clear direction and prompts EUR/USD to keep a tight range around the 1.2200 zone at the beginning of the week.

EUR/USD looks to data

EUR/USD navigates a narrow range near the 1.2200 neighbourhood on Monday amidst the broad-based consolidation in the global markets and the absence of volatility following the inactivity in the US markets due to the Memorial Day holiday.

The pair has so far managed to rebound from last week’s low near 1.2130 (May 28), although the recovery faltered in the 1.2200 zone.

In the meantime, the appetite for riskier assets remains cautious after Chinese PMI data failed to meet markets’ expectations during early trade.

Later in the session, the focus of attention is expected to be on the release of the advanced inflation figures in Germany for the month of May. Earlier, Spanish flash CPI came in at 0.4% MoM and 2.7% on an annualized basis. In addition, the ECB’s M3 Money Supply expanded 9.2 on a year to April and Private Sector Loans rose 3.8% over the last twelve months.

What to look for around EUR

EUR/USD recorded new 4-month highs near 1.2270 during last week before sellers subsequently dragged it to the 1.2130 region, where some decent contention turned up so far. The better mood in the euro remains largely underpinned by the improved sentiment in the risk appetite and the perseverant bearish stance in the greenback, all amidst rising optimism on the recovery in the euro area, which appears in turn supported by the firmer pace of the vaccine rollout. In addition, better-than-expected key fundamentals pari passu with the surging morale in the bloc also props up the upbeat mood surrounding the pair.

Key events in the euro area this week: German flash CPI (Monday) – German labour market report, flash EMU CPI (Tuesday) – German Retail Sales, ECB Lagarde (Thursday) – Germany/EMU Final Composite PMI.

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. German elections.

EUR/USD levels to watch

So far, spot is gaining 0.01% at 1.2192 and faces the next hurdle at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6). On the flip side, a break below 1.2132 (low May 28) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5).