- EUR/USD loses the grip and drops to lows near 1.1980.
- The buying pressure around the dollar weighs on the pair.
- German final Services PMI dropped below 50.0 in April.
The selling pressure remains unabated around the European currency and now drags EUR/USD to fresh multi-day lows in the 1.1985/80 band on Wednesday.
EUR/USD loses ground for the second consecutive session on Wednesday, always on the back of the solid performance of the greenback and some loss of momentum in German yields.
In fact, yields of the German 10-year Bund now navigate around the -0.22% area after climbing as high as the -0.16% zone earlier in the week. On the US side, yields of the 10-year reference manage to reclaim the 1.60% region following a drop to the proximity of 1.55% in the first half of the week.
The offered bias in the pair has been also exacerbated following hawkish comments from US Treasury Secretary J.Yellen on Tuesday after she favoured rate hikes to counteract a potential overheating of the US economy.
In the euro docket, the final Services PMI in Germany slipped back below the key 50.0 threshold in April (49.9), while the same gauge in the broader Euroland bettered the preliminary print at 50.5 (from 49.6). Still in the euro area, Producer Prices rose 1.1% MoM in March and 4.3% from a year earlier.
In the US docket, the ADP report will take centre stage followed by the ISM Non-Manufacturing and speeches by FOMC’s Evans, Rosengren and Mester.
The April rally in EUR/USD met strong resistance around 1.2150 (April 29), sparking a corrective downside to the sub-12000 area for the time being. Despite the ongoing corrective downside in the pair, the outlook for the single currency stays constructive on the back of the investors’ shift to the improved growth outlook in the Old Continent now that the vaccine campaign appears to have gained some serious pace and solid results from key fundamentals pari passu with the surging morale in the bloc.
Key events in the euro area this week: ECB’s Lagarde speech (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.
So far, spot is losing 0.15% at 1.1994 and a breach of 1.1985 (monthly low May 5) would target 1.1940 (200-day SMA) en route to 1.1887 (61.8% Fibo of the November-January rally). On the other hand, the next hurdle emerges at 1.2150 (monthly high Apr.29) followed by 1.2243 (monthly high Feb.25) and finally 1.2349 (2021 high Jan.6).
