EUR/USD retreats from earlier 3-day highs around 1.1390

• EUR/USD looks bid and regains the upside to 1.1390.
• The better mood in the risk complex puts the dollar under pressure.
• Germany, EMU Flash Manufacturing PMI surprised to the downside.

The single currency leaves behind two sessions in a row with losses and pushes EUR/USD back to the vicinity of the 1.1400 mark on Monday.

EUR/USD bolstered by risk appetite

EUR/USD climbed to fresh tops around 1.1390 earlier in the session on the back of the firmer note in the risk-associated universe at the beginning of the week. Indeed, positive news coming from the Russia-Ukraine conflict lends wings to the appetite for riskier assets and underpins the daily rebound in the pair.

The move higher in spot is also propped up by the uptick in yields of the German 10y Bund to the vicinity of 0.24%, reversing at the same time three consecutive daily retracements.

In the domestic calendar, advanced Manufacturing PMIs in Germany and the euro area surprised to the downside at 58.5 and 58.4, respectively, for the month of February.

Across the pond, markets will be closed due to the President’s Day holiday.

What to look for around EUR

EUR/USD continues to look to the geopolitical scenario and the risk appetite trends for near-term direction. Further out, the improvement in the pair’s outlook appears underpinned by fresh speculation of a potential interest rate hike by the ECB at some point by year end, higher German yields, persevering elevated inflation and a decent pace of the economic activity and other key fundamentals in the region

Key events in the euro area this week: Germany, EMU Flash PMIs (Monday) – Germany IFO survey (Tuesday) – Germany GfK Consumer Confidence, EMU Final January CPI (Wednesday) – Eurogroup Meeting, Germany Final Q4 GDP, EMU Final Consumer Confidence, ECB Lagarde (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. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.38% at 1.1361 and faces the next up barrier at 1.1395 (weekly high Feb.16) followed by 1.1487 (200-week SMA) and finally 1.1494 (2022 high Feb.10). On the other hand, a drop below 1.1296 (low Feb.15) would target 1.1279 (weekly low Feb.14) en route to 1.1186 (monthly low Nov.24 2021).