EUR/USD clings to gains, challenges 1.1000 post-IFO

• EUR/USD comes under pressure and retests 1.1000.
• The German IFO Business Climate dropped to 90.8 in March.
• US Consumer Sentiment, Fedspeak next of note across the pond.

The daily rebound in EUR/USD faltered just ahead of the 1.1040 level and sparked a subsequent corrective drop to the 1.1000 neighbourhood on Friday.

EUR/USD: Upside appears capped by 1.1040

Despite the retracement from daily peaks, EUR/USD kept the bid bias unchanged at the end of the week against the backdrop of the correction in the US dollar and the generalized better tone in the risk-linked galaxy.

Somewhat limiting the upside potential in the pair comes the drop in Germany’s Business Climate to 90.8 in March, as per the latest report by the IFO institute.

Later in the NA session, the final March U-Mich gauge is due along with Pending Home Sales and speeches by FOMC’s Williams, Barkin and 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 0.14% at 1.1011 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).