EUR/USD looks vacillating around 1.0900

• EUR/USD attempts to consolidate Wednesday’s strong pullback.
• Construction PMI in Germany retreated markedly to 42.9 in March.
• US Initial Jobless Claims next on tap in the NA session.

The single currency alternates gains with losses amidst a narrow trading range vs. the dollar and motivates EUR/USD to keep business near the 1.0900 region on Thursday.

EUR/USD appears cautious ahead of Friday’s NFP

Following Wednesday’s sharp drop, EUR/USD now attempts some stabilization in the 1.0900 neighbourhood amidst the generalized prudent stance in the global markets and an equally flattish mood around the dollar.

Market participants, in the meantime, keep the cautious stance ahead of the release of the key US Nonfarm Payrolls on Friday (+240K exp.), while expectations for a 25 bps rate hike by the ECB and a pause at the Fed’s meeting in May appear unchanged for the time being.

In the domestic calendar, Germany’s Construction PMI dropped to 42.9 in March, while the same gauge in the broader Euroland eased to 45.0. Earlier in the session, Industrial Production in Germany expanded at a healthy 2.0% MoM in February.

In the US, the only release of note will be the usual weekly Initial Claims.

What to look for around EUR

EUR/USD clings to the 1.0900 region following the strong corrective decline seen in the previous session.

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 Industrial Production, Germany/EMU 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 0.04% at 1.0898 and faces the next contention at 1.0788 (monthly low April 3) followed by 1.0745 (55-day SMA) and finally 1.0712 (low March 24). On the other hand, the surpass of 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level).