EUR/USD remains capped by 1.1000 ahead of key data

• EUR/USD gives away part of the recent advance.
• The dollar kicks in the week slightly on the upside.
• Germany’s IFO Business Climate next on tap in the docket.

Sellers appear to have returned to the European currency and drag EUR/USD back to the 1.0980/70 band at the beginning of the week.

EUR/USD looks at data

EUR/USD loses ground after two consecutive daily gains in response to the so far tepid pick-up in the sentiment around the greenback on Monday.

Looking at the broader picture, the upside bias prevailing in the pair since mid-March remains underpinned by expectations of further tightening by the ECB at its upcoming meetings. On this, a 25 bps rate hike appears already largely priced in in May, while speculation of extra raises at the June and July gatherings also remains on the rise.

In the data space, Germany’s Business Climate tracked by the IFO institute will take centre stage later in the European morning. In the US, the Chicago Fed National Activity Index is due along with the Dallas Fed Manufacturing Index.

What to look for around EUR

EUR/USD keeps the range bound trade well in place always below the 1.1000 region so far on Monday.

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: Germany IFO Business Climate (Monday) – Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro group Meeting, Germany labour market report/ Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (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 1.0982 and faces the next support at 1.0831 (monthly low April 10) seconded by 1.0788 (monthly low April 3) and finally 1.0765 (55-day SMA). On the upside, 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).