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  • EUR/USD loses further momentum and tests 1.1740.
  • The dollar remains firm on the back of higher yields.
  • German March flash inflation figures come up next in the docket.

The selling pressure around the single currency remains anything but abated for yet another session and drags EUR/USD to new YTD lows in the 1.1740 region.

EUR/USD focused on German, US data

EUR/USD extends the pessimism in the first half of the week and navigates the area of yearly lows near 1.1740 on the back of the solid pace of the greenback and higher US yields.

In fact, the pair exacerbates its decline following last week’s breakdown of the critical 200-day SMA (1.1862), which has now become the next immediate target of any occasional bullish attempts.

The move lower in spot comes amidst new yearly highs in the buck and US yields climbing to levels last recorded in January 2020 beyond the 1.75%, all at the same time propped up by the reflation/vaccine trade coupled with recent news of a Biden’s plan to increase the infrastructure spending later this year.

In the euro docket, the advanced German inflation figures for the month of March will take centre stage later on Tuesday seconded by Spanish flash CPI for the same period as well as several sentiment/confidence gauges in the broader euro bloc.

Across the pond, the Conference Board will publish its Consumer Confidence gauge followed by housing data and speeches by FOMC’s R.Quarles (permanent voter, centrist), Atlanta Fed R.Bostic (voter, centrist) and Mew York Fed J.Williams (permanent voter, centrist).

What to look for around EUR

EUR/USD remains under heavy pressure and recedes to new lows further south of the 1.1800 mark. The strong pullback in the pair came along the persistent bid bias of the greenback, which has been undermining the constructive view in the pair in the past weeks. The deterioration of the morale in Euroland coupled with the poor pace of the vaccine rollout in the region and the outperformance of the US economy (vs. its G10 peers) have all been collaborating with the renewed offered stance around the single currency. However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair in the longer run.

Key events in the euro area this week: German March’s flash CPI (Tuesday) – German labour market report, EMU’s flash CPI (Wednesday) – German Retail Sales, final PMIs in the euro area (Thursday).

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.

EUR/USD levels to watch

At the moment, the index is losing 0.11% at 1.1750 and faces the next support at 1.1740 (2021 low Mar.30) seconded by 1.1574 (2008-2021 support line) and finally 1.1602 (monthly low Nov.4). On the upside, a breakout of 1.1862 (200-day SMA) would target 1.1989 (weekly high Mar.11) en route to 1.2000 (psychological level).