EUR/USD bounces off 2022 lows around 1.0480, focus on data

• EUR/USD rebounds from multi-year lows around 1.0480.
• The dollar climbed to levels last seen in 2017 earlier on Thursday.
• Germany Flash CPI, ECB-speak next on note in the domestic docket.

Further downside saw EUR/USD drop to levels last seen in January 2017 around 1.0480 on Thursday.

EUR/USD remains depressed on USD-strength

Following the earlier drop to the sub-1.0500 region, EUR/USD managed to regain some composure and looks to retake the 1.0500 hurdle and beyond in a context still dominated by the solid performance of the greenback.

On the latter, the US Dollar Index (DXY) reached an area last traded back in January 2017 around 103.70, although the sharp move seems to have fizzled out somewhat later.

In the German cash market, the 10y benchmark bund yields so far reverse three daily pullbacks and look to revisit the 0.85% region, while US yields drop modestly during the European morning.

Earlier in the session, ECB Vice-president L. De Guindos stressed that the central bank does not target any exchange rate level and added that the economic growth is expected to be positive this year. De Guindos also noted that higher energy prices affect demand and lift production costs.

In the euro calendar, advanced German inflation figures will take centre stage later in the session along with speeches by McCaul and Elderson. Across the pond, all the attention is expected to be on the publication of the preliminary Q1 GDP as well as Initial Claims.

What to look for around EUR

EUR/USD’s price action shows further deterioration and revisits the sub-1.0500 area for the first time since January 2017. 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. Occasional pockets of strength in the single currency, in the meantime, should appear reinforced by speculation the ECB could raise rates at some point around June/July, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: ECB 2021 Annual Report, Consumer Confidence, Economic Sentiment, Germany Flash Inflation Rate (Thursday) – Germany, EMU Flash Q1 GDP Growth Rate, EMU Flash Inflation Rate (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 down 0.14% at 1.0540 and a break below 1.0480 (2022 low April 28) would target 1.0453 (low January 11 2017) en route to 1.0340 (2017 low January 3 2017). On the upside, the next hurdle appears at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1005 (55-day SMA).