- EUR/USD regains some ground after Thursday’s dips.
- Retail Sales in the euro area surprised the decline in March.
- Market attention will be on US Nonfarm Payrolls.
The European currency is regaining its smile and vibrancy EUR/USD to revisit the 1.1050 region by the end of the week.
EUR/USD is focused on the US docket
EUR/USD managed to regain some buying interest and maintain well the multi-week uptrend since mid-March, which has met decent resistance near the 1.1100 zone so far.
Meanwhile, investors continued to adjust to Thursday’s hawkish message from the ECB, which now appears to be reinforced by earlier comments from Council members Simkus and Müller, who advocated additional rate hikes at their next meeting.
Still around the ECB, the Professional Forecasters Survey (SPF) for Q2 revised down its inflation forecast and now sees the HICP rising 5.6% in 2023 and 2.6% in 2024 vs. 5.9% and 2.7%, respectively. Moreover, the SPF predicts the economy in the euro area to grow 0.6% this year and 1.2% in 2024 vs. 0.2% and 1.4% respectively.
On the domestic calendar, Retail Sales in the euro block contracted 3.8% in the year to March, while the Construction PMI in Germany fell to 42.0 in April (from 42.9).
What to look for around EUR
EUR/USD picked up some steam and left part of the modest pullback seen after the ECB meeting on Wednesday.
The movement in the value of the euro is expected to be very similar to the behavior of the US dollar and is likely to be influenced by the different approaches between the Fed and the ECB with regards to their plans to adjust interest rates.
Looking ahead, the ECB’s hawkish talk continues to support further rate hikes, although this view appears to contrast with the loss of momentum in the economy. fundamentals in the area.
Key events in the euro area this week: German Construction PMI, EMU Retail Sales.
The main problem is at the back of the boiler: Continuation (or not) of the ECB’s bullish cycle. The impact of the Russo-Ukrainian war on growth prospects and inflation prospects in the region. The risk of inflation becomes entrenched.
EUR/USD levels to watch
So far, the pair is gaining 0.17% at 1.1027 and beyond 1.1095 (2023 high Apr.26) will target 1.1100 (round level) en route to 1.1184 (weekly high Mar.21 2022). Conversely, the next support is seen at 1.0941 (monthly low May 2) seconded by 1.0909 (weekly low Apr.17) and finally 1.0831 (monthly low Apr.10).