EUR/USD loses the grip and retreats to 1.2150

  • EUR/USD comes under pressure and revisits 1.2150.
  • The Bundesbank revised up its GDP forecasts for Germany.
  • The US flash June Consumer Sentiment gauge comes up next.

The single currency trades on the defensive and motivates EUR/USD to ease some ground and revisit the 1.2150 region at the end of the week.

EUR/USD looks to USD, risk appetite

EUR/USD remains unable to gather serious traction in either direction on Friday and stays confined to the weekly range between 1.2220 and 1.2150.

The pair barely reacted to the steady hand from the ECB at its meeting on Thursday. The central bank refrained from announcing any modification of the pace of bond purchases under the PEPP, although it now sees inflation higher in 2021 and 2022, while it also expects the economy to expand at a higher rate the next couple of years.

Earlier in the session, and somehow falling in line with the ECB projections, the Bundesbank now sees the German economy to expand. 3.7% this year and 5.2% in 2022 vs. previous forecasts at 3.0% and 4.5%, respectively.

In the euro docket, Spanish final May inflation figures tracked by the headline CPI rose 2.7% from a year earlier and 2.4% when comes to the HICP.

Across the pond, the flash U-Mich index for the current month will be the only data release in the NA session.

What to look for around EUR

The weekly price action in EUR/USD remains erratic against the backdrop of the broad-based consolidative mood in the global markets as well as higher cautiousness among investors in light of now past key events. Looking at the broader scenario, the constructive perspective in the European currency stays in place and appears propped up by auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity in the Old Continent in the months to come and the investors’ appetite for riskier assets.

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. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is losing 0.13% at 1.2151 and a breakdown of 1.2064 (23.6% Fibo retracement of the November-January rally) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5). On the other hand, the next up barrier lines up at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).


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