EUR/USD bounces off lows and retargets 1.0800 ahead of Lagarde

• EUR/USD looks to extend the rebound from 1.0760.
• IFO Business Climate in Germany surprised to the downside.
• ECB C. Lagarde speaks later in the European evening.

The single currency regains some poise and now lifts EUR/USD to the 1.0790 region on Wednesday.

EUR/USD focuses on Lagarde, data, debt ceiling

EUR/USD regains some upside traction following Tuesday’s marked pullback and attempts to leave behind the area of recent monthly lows around 1.0760 on Wednesday.

In the meantime, the tepid recovery attempt in the pair comes along an improvement in the risk-associated universe despite US debt talks now seem to have entered a pause until the next week, according to latest news.

No reaction in the FX universe from the lower-than-expected Business Climate tracked by the IFO institute in Germany. Indeed, the survey showed a drop to 91.7 in May while Current Conditions receded to 88.6 (from 94.8) and Expectations improved to 94.8 (from 92.2).

Data wise in the US, usual weekly MBA Mortgage Applications are due seconded by the publication of the FOMC Minutes of the May event.

What to look for around EUR

EUR/USD attempts another move to retake the 1.0800 hurdle and beyond 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 IFO Business Climate (Wednesday) – Germany Final Q1 GDP Growth Rate, GfK Consumer Confidence (Thursday) – Italy, France Consumer Confidence (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (and 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 0.11% at 1.0780 and a break above 1.0876 (55-day SMA) would target 1.1000 (round level) en route to 1.1095 (2023 high April 26). On the other hand, immediate contention aligns at 1.0759 (monthly low May 19) seconded by 1.0712 (low March 24) and finally 1.0516 (low March 15).