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23 Jun 2021

EUR/USD looks to extend the rebound beyond 1.1950

  • EUR/USD alternates gains with losses just below 1.1950.
  • ECB’s Lagarde will be on the wires later in the session.
  • German flash Manufacturing PMI surprised to the upside.

The single currency trades in an inconclusive manner and motivates EUR/USD to gyrate without clear direction around the 1.1950 area on Wednesday.

EUR/USD now looks to ECB

EUR/USD keeps the mild bid bias in the middle of the week, although a breakout of the 1.1950 area still remains elusive for euro bulls.

Spot gained extra ground late on Tuesday after Chief Powell and other FOMC members reiterated that the current high inflation remains temporary, and an interest rate hike still looks far away for the time being.

In the bond space, yields of the German 10-year benchmark ease from recent peaks and re-test the -0.17% region at the time of writing (from -0.15% on Tuesday).

Extra support for the European currency comes from the euro docket, where advanced Manufacturing/Services PMIs in Germany and the broader Euroland for the current month came in above estimates and improved from the May’s readings. Later in the session, Chairwoman C.Lagarde is due to speak.

What to look for around EUR

EUR/USD’s recovery lost momentum in the mid-1.1900s for the time being. Price action around the pair is expected to exclusively follow the dollar dynamics, at least in the very near term and particularly after the latest FOMC event. In the meantime, support for the European currency comes in the form of auspicious results from fundamentals in the bloc coupled with higher morale, prospects of a strong rebound in the economic activity and the investors’ appetite for riskier assets.

Key events in the euro area this week: EMU, Germany June flash PMIs – (Wednesday) – German IFO survey (Thursday) – German GfK Consumer Confidence, European Council meeting (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. Investors’ shift to European equities.

EUR/USD levels to watch

So far, spot is gaining 0.08% at 1.1946 and faces the next resistance at 1.1993 (200-day SMA) followed by 1.2031 (100-day SMA) and finally 1.2064 (38.2% Fibo retracement of the November-January rally). On the other hand, a break below 1.1847 (monthly low Jun.18) would target 1.1835 (low Mar.9) and route to 1.1704 (2021 low Mar.31).

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