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  • EUR/USD resumes the downside and recedes to 1.0960.
  • ECB’s Christine Lagarde expects a severe economic contraction.
  • Board members Luis De Guindos and Andrea Enria also due to speak.

The single currency came under selling pressure on Wednesday and is now forcing EUR/USD to retreat to the 1.0960 region.

EUR/USD sheds ground on USD-buying

Following another unsuccessful attempt to surpass the psychological 1.10 mark on Monday, EUR/USD is now facing another bout of selling pressure and trades in the 1.0960/70 band.

In fact, the recovery in the greenback has undermined the march north in the pair and the rest of the risk-associated assets, motivating the ongoing knee-jerk in this universe earlier on Wednesday.

It is worth recalling that news regarding a potential coronavirus vaccine by biotech Novavax sustained Tuesday’s move up in the spot, also supported by the relentless progress of the re-opening of economies in the Old Continent.

Still in the region, ECB’s C.Lagarde now sees the economic contraction in the blco to match the medium or severe scenarios. She also reiterated that the central bank’s main target is to ensure price stability, while she defended the implementation of exceptional measures to support liquidity.

Later in the session, ECB’s Board members Guindos and A.Enria are due to participate in virtual events.

What to look for around EUR

The 1.1000 level remains a tough barrier for EUR/USD for the time being. In the meantime, USD-dynamics keep driving the sentiment around the pair, always looking to the US-China trade jitters and the coronavirus economic aftermath. The recent better-than-expected results in Germany and the broader euro area along with positive prospects regarding the re-opening of some economies in the bloc appear to keep occasional bearish attempts contained, all helped by the solid position of the euro area’s current account. In the political scenario, the recent German court ruling against purchases of sovereign debt under the ECB’s QE programme threatens to widen the existing cracks within the euro area and could limit any serious recovery in the currency. This view has been also exacerbated after the French-German proposed fund to help economies to recover from the coronavirus fallout met resistance among some Northern-European members.

EUR/USD levels to watch

At the moment, the pair is losing 0.11% at 1.0969 and faces immediate contention at 1.0870 (weekly low May 26) seconded by 1.0774 (weekly low May 14) and finally 1.0727 (monthly low Apr.24). On the upside, a breakout of 1.1008 (weekly high May 21) would target 1.1010 (200-day SMA) en route to 1.1019 (monthly high May 1).