EUR/USD: Bulls struggle to retake 1.0700

• EUR/USD trades without direction near 1.0700.
• EMU Q1 GDP Growth Rate next of note in the euro area.
• Germany Industrial Production contracted 0.7% MoM in April.

The single currency comes under pressure and motivates EUR/USD to trade marginally on the defensive below 1.0700 on Wednesday.

EUR/USD looks to data, stays cautious ahead of ECB

EUR/USD fails to gather convincing upside traction amidst alternating risk appetite trends against the backdrop of a firmer note in the greenback.

The so far negative performance in the pair comes amidst some small consolidation in German yields, which continue to trade in levels last seen back in June 2014 north of the 1.30% yardstick.

Earlier in the domestic calendar, German Industrial Production contracted at a monthly 0.7% in April, while another revision of the Q1 GDP Growth Rate is also due later. Across the pond, MBA Mortgage Applications come first seconded by Wholesale Inventories and the weekly report on US crude oil stockpiles by the EIA in the week to June 3.

What to look for around EUR

EUR/USD continues to lose momentum and extends further the rejection from peaks beyond the 1.0700 mark in past sessions.

The pair’s recent multi-week recovery has been on the back of supportive ECB-speak, which continued to point at an initial rate hike as soon as in July, while the consensus view that the bond-purchase programme should end at some point in early Q3 has also lent legs to the European currency.

However, EUR/USD is still far away from exiting the woods and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, while higher German yields, persistent elevated inflation in the euro area 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: Advanced EMU Q1 GDP Growth Rate (Wednesday) – ECB Interest Rate Decision (Thursday).

Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro bloc. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is retreating 0.07% at 1.0691 and a breach of 1.0627 (monthly low June 1) would target 1.0532 (low May 20) en route to 1.0459 (low May 18). On the upside, the next hurdle emerges at 1.0786 (monthly high May 30) seconded by 1.0936 (weekly high April 21) and finally 1.0939 (100-day SMA).