EUR/USD resumes the upside and revisits 1.1050 prior to NFP

• EUR/USD regains some composure following Thursday’s drop.
• Retail Sales in the euro area surprised to the downside in March.
• Markets’ attention will be on the US Nonfarm Payrolls.

The European currency regains the smile and encourages EUR/USD to revisit the 1.1050 region at the end of the week.

EUR/USD focuses on the US docket

EUR/USD manages to regain buying interest and maintains well in place the multi-week uptrend in place since mid-March, which it has so far met decent resistance near the 1.1100 zone.

In the meantime, investors continue to adjust to Thursday’s hawkish message from the ECB, which now appears reinforced by earlier comments from Board members Simkus and Müller, who advocated for extra rate hikes at the next meetings.

Still around the ECB, the Survey of Professional Forecasters (SPF) for Q2 revised down the projections for inflation and now sees the HICP rising 5.6% in 2023 and 2.6% in 2024 vs. 5.9% and 2.7%, respectively. Additionally, the SPF predicts the economy in the euro region to expand 0.6% this year and 1.2% in 2024 vs. 0.2% and 1.4%, respectively.

In the domestic calendar, Retail Sales in the euro bloc contracted 3.8% in the year to March, while the Construction PMI in Germany receded to 42.0 in April (from 42.9).

What to look for around EUR

EUR/USD picks up some pace and leaves behind part of the moderated pullback seen in the wake of the ECB gathering on Wednesday.

The movement of the euro's value is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting 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 Construction PMI, EMU Retail Sales.

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 up 0.17% at 1.1027 and the surpass of 1.1095 (2023 high April 26) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). In opposition, the next support is seen at 1.0941 (monthly low May 2) followed by 1.0909 (weekly low April 17) and finally 1.0831 (monthly low April 10).