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  • EUR/USD resumes the upside around the 1.2200 mark.
  • The dollar loses momentum following Wednesday’s strong uptick.
  • German Producer Prices rose 0.8% MoM, 5.2% YoY in April.

The single currency regains the smile and pushes EUR/USD to daily highs in the 1.2200 neighbourhood in the second half of the week.

EUR/USD faces the next hurdle at 1.2250

EUR/USD partially reverses Wednesday’s pullback as buyers regain the upper hand following Wednesday’s moderate retracement in the wake of the FOMC Minutes.

In fact, the greenback saw its demand accelerated after Wednesday’s FOMC Minutes noted that “some members” lean towards the beginning of the tapering process of the bond purchase programme sooner than anticipated considering the current strong recovery in the US economy.

Thursday’s correction lower in the dollar comes in tandem with the mild retracement in yields of the US 10-year note from Wednesday’s tops near 1.70%, while the better tone in yields of the German Bund collaborate further with the upside in the euro.

Earlier in the European docket, German Producer Prices rose at a monthly 0.8% in April and 5.2% from a year earlier. Later, Construction Output and Current Account results are due for the broader Euroland.

Across the pond, the focus of attention will be on the weekly Initial Claims seconded by the Philly Fed index and the Leading Index tracked by the Conference Board.

What to look for around EUR

EUR/USD met decent resistance in the 1.2250 region earlier in the week, extending the bounce off last week’s lows in the mid-1.2000s and always on the back of the strong bounce in yields of the German 10-year Bund and the generalized upbeat tone in the risk complex. The sustained rebound in the pair also comes in response to 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: German/EMU flash May PMIs, advanced Consumer Confidence (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 gaining 0.28% at 1.2203 and faces the next hurdle at 1.2245 (monthly high May 19) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6). On the flip side, a break below 1.2051 (weekly low May 13) would target 1.1985 (monthly low May 5) en route to 1.1960 (200-day SMA).

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