EUR/USD gathers traction and retargets 1.0900 ahead of data, Lagarde

• EUR/USD adds to Monday’s gains and approaches 1.0900.
• EMU GDP, Germany’s Economic Sentiment due later.
• US Retail Sales take centre stage later on Tuesday.

EUR/USD adds to the auspicious start of the week and flirts with the key barrier at 1.0900 the figure on turnaround Tuesday.

EUR/USD now looks at EMU, US data

EUR/USD probes the boundaries of the 1.0900 hurdle amidst the continuation of the corrective decline in the greenback and the generalized improvement in the sentiment surrounding the risk-associated universe.

Indeed, the pair picks up extra pace and extends further the bounce off recent lows near 1.0850 in spite of the so far knee-jerk in US and German yields, while expectation of a pause of the Fed’s normalization process in June and extra rate hikes by the ECB in the next couple of months appear on the rise.

Later in the NA session, the focus of attention will be on the release of US Retail Sales, Industrial Production, the NAHB index and Business Inventories. Additionally, Fed’s Mester, Bostic, Williams, Logan and Barr are also due to speak.

Closer to home, another revision of the Q1 GDP Growth Rate in the euro area is due along with the ZEW’s Economic Sentiment in Germany and the broader euro bloc. Finally, ECB’s Tuominen and Lagarde will also speak later on Tuesday.

What to look for around EUR

EUR/USD extends the weekly rebound and adds to Monday’s promising price action, always with the immediate target at the 1.0900 barrier.

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: ECOFIN Meeting, EMU Flash Q1 GDP Growth Rate, ZEW Economic Sentiment, Germany ZEW Economic Sentiment (Tuesday) – EMU Final Inflation Rate (Wednesday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (September?). 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 gaining 0.17% at 1.0892 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). Conversely, the next contention level emerges at 1.0844 (monthly low May 15) seconded by 1.0831 (monthly low April 10) and finally 1.0802 (100-day SMA).