• EUR/USD leaves behind Monday’s retracement and retakes 1.0900.
• The dollar struggles to extend the rebound amidst lower yields.
• EMU Investor Confidence surprised to the upside in April.

The single currency regains upside traction and lifts EUR/USD back above the 1.0900 yardstick on turnaround Tuesday.

EUR/USD looks at data, USD

EUR/USD so far reverses two consecutive daily pullbacks and manages to advance to the area beyond 1.0900 the figure on the back of some corrective weakness in the greenback and the marked rebound in the risk complex.

Also collaborating with the bounce in the pair emerges another positive performance of the German 10-year Bund yields, which approach the 2.30% region and add to Thursday’s gains.

In the meantime, investors continue to gauge a most likely 25 bps rate hike by both the ECB and the Federal Reserve. The likeliness of a move on rates on the latter has gathered pace following the solid US jobs report published on Friday.

Closer to home, the Investor Confidence tracked by the Sentix Index in the broader Euroland improved to -8.7 in April, while Retail Sales in the region are due later.

What to look for around EUR

EUR/USD clings to the 1.0900 region following the marked retracement seen in the last couple of sessions.

In the meantime, 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: EMU Sentix Index, Retail Sales (Tuesday) – Germany Final Inflation Rate, EMU Industrial Production (Thursday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is gaining 0.44% at 1.0901 and a break above 1.0973 (monthly high April 4) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level). On the flip side, the next support comes at 1.0788 (monthly low April 3) followed by 1.0746 (55-day SMA) and finally 1.0712 (low March 24).