EUR/USD regains the smile and the 1.1000 barrier

EUR/USD picks up renewed buying interest and surpasses 1.1000.
The Greenback appears offered in tandem with shrinking risk aversion.
Germany’s Consumer Confidence surprised to the upside in May.
The single currency regains some composure and lifts EUR/USD back above the key hurdle at 1.1000 the figure.

EUR/USD continues to target the YTD top
EUR/USD gathers some extra steam and partially reverses the sharp decline seen on Tuesday when spot lost around a cent from tops around 1.1060 to 2-day lows in the vicinity of 1.0960.

The rebound in the pair comes on the back of diminishing risk aversion, which in turn favours the resumption of the selling pressure in the Greenback in a context of further weakness in US yields across the curve.
Also bolstering the upside bias around the Euro emerges the continuation of the hawkish narrative from ECB’s policy makers, who leaves the door open to a 50 bps rate hike in May (despite this is not the most likely scenario so far) as well as extra rate raises at both meetings in June and July.

In the docket, Germany’s Consumer Confidence gauged by GfK improved to -25.7 for the month of May, while the Consumer Confidence rose to 83. In France in April.

Later in the NA session, Durable Goods Orders, MBA Mortgage Applications and Advanced Goods Trade Balance are all due.

What to look for around EUR
EUR/USD regains balance and reclaims the area beyond the 1.1000 barrier following the weak note in the Dollar and dwindling risk-off trade.

Meanwhile, price action around the single currency should continue to closely follow dollar dynamics, as well as the incipient Fed-ECB divergence when it comes to the banks’ intentions regarding the potential next moves in 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 GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro group Meeting, Germany labour market report/ Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (Friday).

EUR/USD levels to watch
So far, the pair is gaining 0.39% at 1.1015 and the breakout of 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21 2022). On the other hand, the initial support aligns at 1.0909 (weekly low April 17) seconded by 1.0831 (monthly low April 10) and finally 1.0788 (monthly low April 3).