EUR/USD holds on to the 1.0700 region on mixed risk trends

• EUR/USD fades the earlier spike to the 1.0770 zone.
• US headline/Core PCE failed to surprise markets in April.
• US final Consumer Sentiment next of note in the calendar.

EUR/USD wobbles around the 1.0700 neighbourhood amidst mixed risk appetite trends at the end of the week.

EUR/USD looks well supported around 1.0700

EUR/USD came under some moderate selling pressure soon after printing fresh monthly highs near 1.0770 earlier in the session.

Indeed, the pair now exchanges gains with losses amidst the equally lack of a clear direction in the greenback, which managed to bounce off new monthly lows near 101.40 when tracked by the US Dollar Index (DXY).

No meaningful reaction in the pair to US inflation figures after the headline PCE rose 6.3% in the year to April and 4.9% YoY when it comes to the Core print. Further April data saw the trade deficit shrink to $105.94B, Personal Income expand 0.4% MoM and Personal Spending rise 0.9% inter-month. Later in the NA session, the final U-Mich Index will close the weekly calendar.

What to look for around EUR

The intense selling bias in the dollar puts EUR/USD on track to challenge the 1.0800 region in the short-term horizon.

Despite the pair’s upside impulse, the broader outlook for the single currency remains negative for the time being. As usual, price action in spot should reflect dollar dynamics, geopolitical concerns and the Fed-ECB divergence.

Occasional pockets of strength in the single currency, however, 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.

Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro area. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is losing 0.03% at 1.0718 and a breach of 1.0459 (low May 18) would target 1.0348 (2022 low May 13) en route to 1.0340 (2017 low January 3 2017). On the other hand, the immediate hurdle aligns at 1.0765 (monthly high May 24) followed by 1.0771 (55-day SMA) and finally 1.0936 (weekly high April 21).