EUR/USD advances to 2-day highs near 1.1040

• EUR/USD reclaims ground lost above the 1.1000 mark.
• The dollar’s upside takes a breather on Friday.
• Germany IFO Business Climate next of note in the docket.

The single currency regains upside traction and lifts EUR/USD to the area of 2-day peaks near 1.1040 at the end of the week.

EUR/USD looks bid on risk-on trade

EUR/USD regains the smile after two consecutive daily pullbacks and looks to consolidate the recovery of the 1.1000 mark and above on Friday, always against the backdrop of an improved sentiment in global markets.

By the same token, the greenback flirts with multi-day lows in the 98.50 region when tracked by the US Dollar Index (DXY) in a context of mixed performance of US yields across the curve.

The decent advance in spot comes along another positive performance of German 1oy bund yields, this time surpassing the 0.50% for the first time since October 2018.

In the domestic calendar, Germany’s Business Climate gauged by the IFO survey will be the salient event in the euro area, whereas the final Consumer Sentiment print for the month of March will grab all the attention across the Atlantic along with another round of Fed-speakers (Williams, Barkin, Waller).

What to look for around EUR

EUR/USD retakes the 1.1000 mark and advances further north in tandem with the better mood among market participants. So far, pockets of strength in the single currency should appear reinforced by the speculation of the start of the hiking cycle by the ECB at some point by year end, 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 firmer euro for the time being.

Key events in the euro area this week: Germany IFO Business Climate (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. Presidential elections in France in April. Impact of the geopolitical conflict in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.31% at 1.1030 and faces the next up barrier at 1.1137 (weekly high March 17) followed by 1.1219 (55-day SMA) and finally 1.1266 (100-day SMA). On the other hand, a drop below 1.0960 (low March 22) would target 1.0900 (weekly low March 14) en route to 1.0805 (2022 low March 7).