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  • EUR/USD’s daily upside run out of steam around 1.2150.
  • EMU’s Industrial Production expanded 0.1% MoM in March.
  • US CPI takes centre stage later in the NA session.

EUR/USD failed to extend the daily move further north of the 1.2150 level on Wednesday, sparking the ongoing recovery afterwards.

EUR/USD looks to USD, risk trends

EUR/USD reverses Tuesday’s advance and resumes the downside on the back of the mild upside traction in the dollar, steady US yields and some risk aversion sentiment among investors.

In fact, the resurgence of inflation fears prompted the resumption of the risk aversion trade as well as a moderate bounce in volatility in the global markets, all morphing into extra support to the dollar.

In the euro docket, final German CPI rose 0.7% MoM in April and 2.0% from a year earlier. In the broader Euroland, the Industrial Production expanded less than expected by a meagre 0.1% MoM during March and 10.9% over the last twelve months.

Data wise across the pond, inflation figures tracked by the CPI will be in the limelight seconded by MBA’s Mortgage Applications and the EIA report on crude oil supplies. In addition, FOMC’s Clarida. Bostic and Harker are due to speak.

What to look for around EUR

EUR/USD extended further the bounce off the 1.1985/80 band and faltered in the 1.2180 region so far this week, area coincident with a Fibo level (of the November-January rally). The rebound in the sentiment around the single currency stays constructive on the back of the investors’ shift to the improved growth outlook in the Old Continent now that the vaccine campaign appears to have gained some serious pace and solid results from key fundamentals pari passu with the surging morale in the bloc.

Key events in the euro area this week: ECB Accounts (Friday).

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 losing 0.10% at 1.2132 and a breach of 1.1985 (monthly low May 5) would target 1.1949 (200-day SMA) en route to 1.1887 (61.8% Fibo of the November-January rally). On the upside, the next hurdle is located at 1.2181 (monthly high May 11) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6).

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