EUR/USD looks firm and revisits the 1.0570 region, focus on US CPI

• EUR/USD trades on a positive note and retargets the 1.0600 mark.
• German final CPI rose 7.4% YoY, 0.8% MoM in April.
• ECB’s Lagarde expects the APP to end at some point in Q3.

The single currency regains some composure and lifts EUR/USD back to the 1.0570 region on Wednesday.

EUR/USD up on USD weakness, ECB

EUR/USD resumes the upside and leaves behind Tuesday’s downtick, although the bullish attempt once again bumped against the 1.0570/80 resistance area.

The positive performance of the pair came in response to the renewed weakness in the greenback as well as the persistent hawkish message from ECB speakers. On the latter, Board members Müller and Villeroy continue to lean towards an interest rate hike as soon as this summer, while Chairwoman Lagarde reiterated that the bond-purchase programme is expected to conclude in Q3 and that the central bank will normalize its monetary policy at a gradual pace following the first rate hike.

Speaking about cash markets, the German 10y Bund yields grind lower for the third session in a row and slip back below the 1.00% mark so far on Wednesday. The move echoes the performance of their US and UK peers.

Data wise, German final CPI rose 7.4% YoY and 0.8% MoM in April. Across the pond, weekly Mortgage Applications are due in the first turn seconded by key inflation figures gauged by the CPI for the month of April.

What to look for around EUR

EUR/USD revisits the 1.0570/80 band following the absence of upside traction in the greenback on Wednesday. The outlook for the pair still points to 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 in the summer, 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: Final Germany Inflation Rate, ECB Lagarde (Wednesday) – EMU Industrial Production (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. Impact on the region’s economic growth prospects of the war in Ukraine.

EUR/USD levels to watch

So far, spot is gaining 0.43% at 1.0571 and faces the next up barrier at 1.0641 (weekly high May 5) followed by 1.0936 (weekly high April 21) and finally 1.1000 (round level). On the other hand, a break below 1.0470 (2022 low April 28) would target 1.0453 (low January 11 2017) en route to 1.0340 (2017 low January 3 2017).