EUR/USD: Bulls push harder and target 1.0593 pre-FOMC

• EUR/USD gathers renewed upside traction near 1.0560.
• The dollar’s momentum deflates somewhat ahead of FOMC.
• US ADP Report disappointed expectations at 247K in April.

The optimism around the shared currency now helps EUR/USD clinch fresh peaks in the 1.0555/60 band on Wednesday.

EUR/USD: All the attention on the Fed

EUR/USD now adds to Tuesday’s modest advance against the backdrop of the renewed offered bias in the US dollar. However, the extension and duration of this bullish move will be put to the test later in the day by the FOMC event.

It is worth recalling that the Federal Reserve is largely expected to raise the Fed Funds Target Range (FFTR) by 50 bps, although investors are expected to closely follow the subsequent press conference by Chair Powell, where the potential rate path and the balance sheet runoff should be in the centre of the debate.

Earlier in the session, the ADP Report showed the US private sector added 247K jobs during last month, while the ISM Non-Manufacturing is due later.

What to look for around EUR

EUR/USD remains depressed and flirts with the 1.0500 zone amidst lack of upside traction and absence of bulls’ conviction. The outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by speculation the ECB could raise rates at some point around June/July, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: Germany Balance Trade, Final Services PMI, EMU Final Services PMI, Retail Sales (Wednesday) – Germany Factory Orders, Construction PMI (Thursday) – Germany Industrial Production (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. Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.17% at 1.0536 and faces the next hurdle at 1.0593 (high April 29) followed by 1.0936 (weekly high April 21) and finally 1.1000 (round level). On the other hand, a breach of 1.0470 (2022 low April 28) would target 1.0453 (low January 11 2017) en route to 1.0340 (2017 low January 3 2017).