EUR/USD reverses the weakness and revisits 1.1430

• EUR/USD regains some poise and retakes the 1.1430 zone.
• German 1py Bund yields ease a tad from recent peaks.
• German trade surplus shrank to €6.8B in December.

Following two consecutive daily pullbacks, EUR/USD regains the smile and advances to the 1.1430 zone midweek.

EUR/USD looks to USD, yields

EUR/USD resumes the upside and leaves behind the recent bearish move following 2022 tops past 1.1480 (February 4). The near-term positive view in spot stays so far underpinned by the 5-month line, today around 1.1400.

In the meantime, the performance of yields on both sides of the Atlantic continues to dictate the price action in the pair along with tightening prospects from both the Federal Reserve and the European Central Bank, all against the backdrop of the persevering elevated inflation.

In the domestic docket, the German trade surplus shrank to €6.8B in December (from €10.9B), while the Current Account surplus increased to €23.9B, also in December. In Italy, Industrial Production figures are expected later.

In the NA session, usual weekly Mortgage Applications are due seconded by Wholesale Inventories, while Cleveland Fed L.Mester (voter, hawkish) is also due to speak.

What to look for around EUR

EUR/USD appears to be decently supported in the 1.1400 neighbourhood for the time being. The optimism around spot seems threatened by the recovery in the greenback, which has particularly regained traction after US Nonfarm Payrolls surprised to the upside in January. The now improved outlook in the pair looks bolstered by prospects of a potential interest rate hike by the ECB at some point by year end, higher German yields, elevated inflation in the region and a decent pace of the rebound in the economic activity and other key fundamentals.

Key events in the euro area this week: Germany Balance of Trade (Wednesday) - Germany Final January CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.08% at 1.1423 and faces the next up barrier at 1.1483 (2022 high Feb.4) followed by 1.1496 (200-week SMA) and finally 1.1667 (200-day SMA). On the other hand, a break below 1.1319 (55-day SMA) would target 1.1121 (2022 low Jan.28) en route to 1.1100 (round level).