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  • EUR/USD loses further momentum, trades closer to 1.2200.
  • The demand for the dollar picks up pace despite depressed yields.
  • FOMC’s R.Quarles speaks later on “Economic Outlook”.

EUR/USD now comes under extra selling pressure and gradually approaches the support at the 1.2200 neighbourhood.

EUR/USD weaker on dollar recovery

The selling pressure around the single currency now gathers steam and relegates EUR/USD to the lower end of the daily range just pips above the 1.2200 yardstick.

Profit taking mood combines with the rebound in the greenback to drag spot lower, shedding further ground after recording new monthly tops in the 1.2265/70 band on turnaround Tuesday.

The offered stance in the European currency also comes in response to the drop in yields of the German 10-year Bund to the -0.20% neighbourhood, all after climbing as high as the -0.07% area at some point during last week.

In the docket, French Consumer Confidence improved to 97 for the month of May (from 95). Across the pond, MBA Mortgage Applications shrunk by 4.2% from a week earlier while the EIA’s weekly report on crude oil inventories will close the calendar ahead of the speech by FOMC’s R.Quarles.

What to look for around EUR

EUR/USD recorded new 4-month highs near 1.2270 on Tuesday. The move remains largely underpinned by the improved sentiment in the risk appetite and the persistent sell-off in the greenback 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 GfK Consumer Climate (Thursday) – Final May 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 losing 0.23% at 1.2220 and a break below 1.2051 (weekly low May 13) would target 1.1985 (monthly low May 5) en route to 1.1968 (200-day SMA). On the other hand, the next hurdle is located at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).