EUR/USD sinks below 1.0800 on dollar strength, focus on Lagarde

• EUR/USD loses further momentum and breaches 1.0800.
• Germany, EMU flash PMIs came in a mixed tone in April.
• ECB Lagarde speaks later in the European afternoon.

The selling bias in the European currency picks up pace and drags EUR/USD back below the 1.0800 area at the end of the week.

EUR/USD depressed on USD-buying

EUR/USD adds to Thursday’s pullback and recedes further after climbing as high as to the 1.0940 zone in the previous session.

Indeed, the re-emergence of the bid bias in the greenback put the pair under renewed and quite strong downside pressure following another hawkish message from Chief Powell at his speech at the IMF event on Thursday.

The so far downtick in spot comes pari passu with further upside in US and German yields, particularly in the short end and the belly of the curve. In the German cash market, the 10y bund yields trade at shouting distance from the key 1.00% barrier, an area last visited back in June 2015.

Data wise in the euro bloc, preliminary readings for the Manufacturing and Services PMIs in Germany and the Euroland came in mixed for the month of April. Still in the region, Chair Lagarde is also due to speak later on Friday.

Across the pond, flash PMIs for the current month will also be published.

What to look for around EUR

EUR/USD’s price action shows further deterioration below the 1.0800 key support at the end of the week. 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. As usual, occasional pockets of strength in the single currency should appear reinforced by speculation the ECB could raise rates before the end of the year, while higher German yields, elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region are also supportive of a rebound in the euro.

Key events in the euro area this week: EMU, Germany Flash Manufacturing, Services PMIs (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 0.26% at 1.0803 and a break below 1.0757 (2022 low April 14) would target 1.0727 (low April 24 2020) en route to 1.0635 (2020 low March 23). On the upside, the next hurdle appears at 1.0936 (weekly high April 21) seconded by 1.1000 (round level) and finally 1.1064 (55-day SMA).