• EUR/USD fades the initial optimism and recedes below 1.2200.
• The dollar attempts a recovery ahead of key data releases.
• Final May EMU Services PMI came in above consensus.

The single currency resumes the downside after a positive start of the session and now drags EUR/USD back below the key support at 1.2200 the figure.

EUR/USD meets support near the 20-day SMA

EUR/USD sheds ground for the third consecutive session on the back of further recovery in the greenback so far on Thursday.

In fact, the continuation of the buying pressure in the dollar puts the pair under further downside pressure despite the move higher in yields of the German 10-year Bunds and recent higher-than-expected inflation figures in the bloc.

The pair, in the meantime, follows the weekly consolidative theme as market participants continue to look to the release of the May’s Nonfarm Payrolls (Friday) for a better driver of the dollar’s direction in the near-term.

Data wise in the euro bloc, the final May Services PMI in Germany stayed unchanged vs. the preliminary readings at 52.8, while the same gauge in the broader Euroland improved to 55.2.

Later in the NA session, the ADP Report is due followed by Initial Claims, the ISM Non-Manufacturing, Challenger Job Cuts and the final Markit’s Services/Composite PMI.

What to look for around EUR

EUR/USD once again met sellers near the 1.2250 area so far this week. The prevailing better mood in the euro remains largely underpinned by the improved sentiment in the risk appetite and the perseverant bearish stance in the greenback, all amidst rising optimism on the recovery in the euro area, which appears in turn supported by the firmer pace of the vaccine rollout. In addition, better-than-expected key fundamentals pari passu with the surging morale in the bloc also props up the upbeat mood surrounding the pair.

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the vaccine rollout. Probable political effervescence around the EU Recovery Fund. German elections.

EUR/USD levels to watch

So far, spot is losing 0.13% at 1.2192 and a break below 1.2132 (low May 28) would target 1.2051 (weekly low May 13) en route to 1.1985 (monthly low May 5). On the upside, next hurdle is located at 1.2266 (monthly high May 25) followed by 1.2300 (round level) and finally 1.2349 (2021 high Jan.6).