EUR/USD bounces off lows near 1.0870, looks to FOMC

• EUR/USD rebounds from 4-week lows near 1.0870.
• The dollar recedes from new cycle peaks around 99.75.
• The FOMC Minutes will grab all the attention later in the session.

The European currency regains some composure and manages to lift EUR/USD back to the positive territory beyond the 1.0900 barrier on Wednesday.

EUR/USD now looks to FOMC

After four consecutive daily pullbacks, EUR/USD finally regains the smile, although not before hitting fresh lows in the 1.0875/70 band during early trade on Wednesday.

Indeed, the greenback seems to be giving away part of the recent strong advance and sponsors at the same time the rebound in spot back above the 1.0900 hurdle against the backdrop of rising US and German yields.

In the domestic calendar, Germany Factory Orders contracted at a monthly 2.2% in February and the Construction PMI eased to 50.9 in March. In the broader Euroland, Producer Prices rose less than forecast 1.1% MoM in February and 31.4% over the last twelve months.

In the NA session, Mortgage Applications tracked by MBA are due next seconded by Philly Fed P.Harker’s speech and the release of the FOMC Minutes of the March meeting.

What to look for around EUR

EUR/USD remains under pressure, although it manages to bounce off the 1.0870 region so. The recent negative performance of the pair came in response to the firmer pace of the greenback and renewed geopolitical concerns. As usual, pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a rebound in the euro.

Key events in the euro area this week: Germany Factory Orders, Construction PMI, EMU Producer Prices (Wednesday) – EMU Retail Sales, ECB Accounts (Thursday) – France Presidential Election (Sunday, April 10).

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. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.03% at 1.0907 and the next up barrier emerges at 1.1164 (55-day SMA) followed by 1.1184 (weekly high March 31) and finally 1.1231 (100-day SMA). On the flip side, a breakdown of 1.0874 (monthly low April 6) would target 1.0805 (2022 low March 7) en route to 1.0766 (monthly low May 7 2020).