EUR/USD hovers around the mid-1.0700s on Friday

: George Solotarov; 03 June 2022; Hits: 316

EUR/USD hovers around the mid-1.0700s on Friday

Price action around EUR/USD falls in line with the generalized side-lined mood in the rest of the global markets at the end of the week. EUR/USD trades within a tight range around 1.0750 amidst the prevailing cautious mood among market participants ahead of the key releases due later in the US calendar. In the meantime, markets continue to bet on potential rate hikes by the ECB and currently price in a 50 bps hike at the October meeting. In the German money markets, the 10y bund yields extend further the march north and have already left behind the 1.25% mark, an area last traded back in May 2014. In the euro calendar, the German trade surplus widened to €3.5B in April and the Services PMI eased to 55.0 in May.

In the broader Euroland, Retail Sales contracted 1.3% MoM in April and expanded 3.9% from the year-earlier, while the final Services PMI receded to 56.1 during last month. Other than the Nonfarm Payrolls, the US docket will see the Unemployment Rate, the ISM Non-Manufacturing, and the final Services PMI.

EUR/USD met quite a solid resistance near 1.0800 so far this week on the back of supportive ECB-speak, which continued to point at an initial rate hike as soon as in July, while the consensus view that the bond-purchase program 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 penciled 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. It is expected to remain at the mercy of dollar dynamics, geopolitical concerns, and the Fed-ECB divergence. At the same time, 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. So far, the spot is gaining 0.01% at 1.0746 and faces the immediate up barrier at 1.0786 (monthly high May 30) seconded by 1.0936 (weekly high April 21) and finally 1.0959 (100-day SMA). On the other hand, a breach of 1.0627 (weekly low June 1) would target 1.0532 (low May 20) en route to 1.0459 (low May 18).