• EUR/USD leaves behind Wednesday’s pullback.
• The dollar starts the European session on the back footing.
• US Flash Q1 GDP, Initial Claims take centre stage later in the NA session.

The single currency appears bid and motivates EUR/USD to attempt another bull run to the 1.0700 neighbourhood.

EUR/USD focuses on 1.0750

EUR/USD manages to regain some upside traction and trade at shouting distance from the 1.0700 barrier. The surpass of this level should sponsor a probable challenge of the May high near 1.0750 recorded earlier in the week.

The small gains in the pair come amidst shrinking yields in both US and German money markets in a context of alternating risk appetite trends and following recent hawkish messages from ECB’s rate setters and the absence of any surprises from the release of the FOMC Minutes on Wednesday.

The euro calendar will be empty on Wednesday and this should leave all the attention to another revision of the US Q1 GDP followed by usual weekly Claims and results from the housing sector.

What to look for around EUR

The moderate rebound in the dollar put the recent sharp upside in EUR/USD to the test and sparked a moderate drop to the 1.0640 region, where decent contention appears to have emerged.

Despite the pair’s upside impulse, the broader outlook for the single currency remains negative for the time being. As usual, price action in spot should reflect dollar dynamics, geopolitical concerns and the Fed-ECB divergence.

Occasional pockets of strength in the single currency, however, should appear reinforced by speculation the ECB could raise rates at some point in the summer, while higher German yields, elevated inflation and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro.

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 0.11% at 1.0688 and faces the immediate hurdle at 1.0748 (monthly high May 24) followed by 1.0773 (55-day SMA) and finally 1.0936 (weekly high April 21). On the other hand, a breach of 1.0459 (low May 18) would target 1.0348 (2022 low May 13) en route to 1.0340 (2017 low January 3 2017).