EUR/USD remains cautious and retreats from recent peaks, back to 1.0950

• EUR/USD fades part of the initial move to 1.0970 on Wednesday.
• Final Services PMIs in Germany and the EMU remained firm in March.
• The US ADP report came in below expectations at 145K jobs.

EUR/USD alternates gains with losses around the 1.0950 region on Wednesday.

EUR/USD: Initial resistance appears in the 1.0970/80 band

EUR/USD keeps the cautious note and exchanges ups & downs in the 1.0950 region amidst the equally inconclusive price action around the greenback on Wednesday.

Earlier hawkish comments from ECB policy makers (Vasle, Vujcic) lend some support to the single currency along with healthy prints from Services PMIs in the euro area, although the generalized steady prudence ahead of the NFP figures on Friday appears to keep bulls contained for the time being.

In US data space, the ADP Employment Report showed the US private sector created 145K jobs in March vs. 200K expected and down from February’s 261K jobs. Additionally, the US trade deficit widened to $70.5B in February and the final Services PMI improved to 52.6 during last month. Finally, the ISM Non-Manufacturing is expected later in the session.

What to look for around EUR

EUR/USD keeps the weekly rally well and sound despite the ongoing knee-jerk, allowing for a potential test of the key 1.1000 mark sooner rather than later.

In the meantime, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in interest rates.

Moving forward, hawkish ECB-speak continue to favour further rate hikes, although this view appears in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany, EMU Final Services PMI (Wednesday) – Germany Construction PMI (Thursday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is losing 0.05% at 1.0944 and faces the immediate contention at 1.0788 (monthly low April 3) followed by 1.0745 (55-day SMA) and finally 1.0712 (low March 24). On the flip side, a break above 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level).