- EUR/USD struggles for direction around the 1.18 area.
- The dollar remains on the positive path and records 2021 highs.
- US final Q4 GDP came in at 4.3% QoQ, surpassing consensus.
The single currency stays well on the defensive and drags EUR/USD to fresh YTD lows in sub-1.1800 levels on Thursday.
EUR/USD in 4-month lows
EUR/USD extends the leg lower to levels below the 1.1800 yardstick for the first time since November 2020 on the back of the unabated upside momentum in the greenback.
In fact, the prospects of a solid recovery in Europe now appear dented, as investors keep adjusting to the possibility of another wave of the pandemic in combination with increasing lockdown restrictions in several countries.
Earlier in the session, the German Consumer Confidence tracked by GfK bettered to -6.2 for the month of April, while Business Confidence in France stayed unchanged at 98 for the current month. Results from the ECB showed that M3 Money Supply expanded 13.3% on a year to January, surpassing forecasts, while Private Sector Loans increased 3.0% from a year earlier.
In the US, final Q4 GDP figures noted the economy expanded 4.3% QoQ and Initial Claims went up by 684K WoW during last week.
What to look for around EUR
EUR/USD remains under heavy pressure and puts the 1.1800 neighbourhood to the test amidst increasing upside pressure around the dollar. In fact, the persistent solid performance of the greenback has been undermining the constructive view in the pair in the past weeks, as market participants continue to adjust to higher US yields, the outperformance of the US economy (vs. its G10 peers) and the deterioration of the morale in Euroland. However, the steady hand from the ECB (despite some verbal concerns) in combination with the expected rebound of the economic activity in the region in the post-pandemic stage is likely to prevent a much deeper pullback in the pair.
Key events in the euro area this week: European Council meeting (Thursday and Friday).
Eminent issues on the back boiler: Potential ECB action to curb rising European yields. EUR appreciation could trigger ECB verbal intervention, especially amidst the future context of subdued inflation. Probable political effervescence around the EU Recovery Fund.
EUR/USD levels to watch
At the moment, the index is losing 0.13% at 1.1796 and faces the next support at 1.1791 (2021 low Mar.25) seconded by 1.1762 (78.6% Fibo of the November-January rally) and finally 1.1602 (monthly low Nov.4). On the other hand, a breakout of 1.1989 (weekly high Mar.11) would target 1.2000 (psychological level) en route to 1.2038 (50-say SMA).