EUR/USD: Buyers push harder and target 1.0800

  • EUR/USD pokes the 55-day SMA around 1.0770.
  • The greenback extends the bearish note on Monday.
  • Flash German CPI next of note in the docket.

The optimism around the European currency remains well and sound and now lifts EUR/USD to fresh highs in the boundaries of 1.0770 on Monday.

EUR/USD focuses on 1.0800

EUR/USD therefore advances for the third session in a row and extends the 4-cent rebound to the vicinity of the interim hurdle at the 55-day SMA, slowly approaching the 3-month resistance line in the 1.0800 neighbourhood.

As usual in past sessions, the persistent weakness surrounding the greenback has been behind the pair’s renewed and strong upside, helped at the same time by the shift to a more hawkish tone from ECB’s policymakers.

In the domestic calendar, EMU’s final figures saw the European Commission’s Consumer Confidence ease a tad to -21.1 in May while the Economic Sentiment improved slightly to 105 in the same month. Later in the session, all the attention will be on the release of the advanced inflation figures in Germany for the month of May.

There are no data releases across the pond, as US markets are closed due to the Memorial Day holiday.

What to look for around EUR

EUR/USD’s bounce off 2022 lows near 1.0350 (May 13) has been so far underpinned by unusual hawkish ECB-speak leaning towards an initial rate hike as soon as in July, while the consensus view that the bond-purchase programme should end at some point in early Q3 has also lent legs to the European currency.

In addition, the renewed selling bias in the greenback has also collaborated with the multi-cent upside in the pair, as investors appear to have already pencilled in a couple of 50 bps rate hikes at the June and July gatherings.

However, EUR/USD is still far away from exiting the woods and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, while higher German yields, elevated inflation and a decent pace of the economic recovery in the euro bloc are also supportive of an improvement in the mood around the euro.

Key events in the euro area this week: EMU Final EC Consumer Confidence, Economic Sentiment, Germany Flash Inflation (Monday) – Germany Unemployment Change, Unemployment Rate, EMU Flash Inflation Rate (Tuesday) – Germany Retail Sales, Final Manufacturing PMI, EMU Final Manufacturing PMI, ECB Lagarde (Wednesday) – Germany Balance of Trade, Final Services PMI, EMU Retail Sales, Final Services PMI (Friday).

Eminent issues on the back boiler: Speculation of the start of the hiking cycle by the ECB as soon as this summer. Asymmetric economic recovery post-pandemic in the euro area. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far, spot is gaining 0.29% at 1.0766 and faces the immediate hurdle at 1.0800 (round level) followed by 1.0936 (weekly high April 21) and finally 1.0987 (100-day SMA). On the other hand, a breach of 1.0641 (low May 25) would target 1.0532 (low May 20) en route to 1.0348 (2022 low May 13).

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