EUR/USD fades part of the recent advance amidst USD recovery

• EUR/USD loses the grip and recedes to the 1.0950 region.
• EMU final inflation figures next of note in the domestic docket.
• Fed’s Beige Book next of note across the pond on Wednesday.

Sellers seem to have returned to the single currency and drags EUR/USD back to the mid-1.0900s on Wednesday.

EUR/USD looks at data, USD

EUR/USD extends the choppy trading so far this week and now partially fades Tuesday’s uptick on the back of a decent rebound in the dollar and the continuation of the march north in the German 10-year Bund yields.

In the absence of strong drivers, price action around the pair keeps looking to the upcoming interest rate decision by the ECB and the Fed, with both central banks expected to raise rates by 25 bps in May.

The latter appears well underpinned by recent hawkish comments from policy makers on both sides of the ocean, who kept advocating for a tighter-for-longer stance amidst the still elevated inflation.

In the euro calendar, final inflation figures in the broader Euroland will be the sole release on Wednesday. In the US, weekly Mortgage Applications tracked by MBA are due along with the publication of the Fed’s Beige Book.

What to look for around EUR

EUR/USD comes under downside pressure following a failed attempt to retest/surpass the ley 1.1000 neighbourhood.

Meanwhile, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: EMU Final Inflation Rate (Wednesday) – ECB Accounts, EMU Flash Consumer Confidence (Thursday) – Advanced Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Continuation (or not) of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is losing 0.05% at 1.0966 and faces the next support at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0756 (55-day SMA). On the flip side, a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022).