EUR/USD trims gains and returns to the sub-1.0900 area

• EUR/USD fades the earlier spike to the vicinity of 1.0940.
• ECB’s rate-setters see a probable rate hike in July.
• Chair Powell speaks later on the global economy.

Following the earlier spike to fresh 2-week highs in the 1.0935/40 band, EUR/USD comes under some mild downside pressure and now returns to the area below 1.0900 on Thursday.

EUR/USD now looks to Powell

EUR/USD keeps the bid bias unchanged so far this week and maintains the rebound from Monday’s sub-1.0800 levels well in place amidst the persistent corrective downside in the greenback.

Further rebound in the pair comes amidst the equally positive performance in US and German yields, which manage well to regain upside traction and reverse Wednesday’s pullback.

Earlier in the euro docked, inflation figures in the broader Euroland came a tad below the flash prints for the month of March, while the European Commission’s flash Consumer Confidence is due later in the day.

In the US calendar, Initial Claims rose by 184K in the week to April 16 and the Philly Fed Manufacturing Index deflated to 17.6 in April (from 27.4). Later in the NA session, Chief Powell will speak on The Global Economy at an IMF event.

What to look for around EUR

EUR/USD regains some composure and trespasses 1.0900 to clinch fresh multi-day tops. The duration and extension of the ongoing bounce, however, remains to be seen, as the outlook for the pair still remains tilted towards the bearish side, always in response to dollar dynamics, geopolitical concerns and the Fed-ECB divergence. As usual, occasional pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, 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 rebound in the euro.

Key events in the euro area this week: Final EMU Inflation Rate, Flash EMU Consumer Confidence (Thursday) – EMU, Germany Flash Manufacturing, Services PMIs (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. Second round of the presidential elections in France (April 24). Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is up 0.40% at 1.0893 and faces the next up barrier at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1078 (55-day SMA). On the other hand, the break below 1.0757 (2022 low April 14) would target 1.0727 (low April 24 2020) en route to 1.0635 (2020 low March 23).