EUR/USD drops to lows around 1.1220 ahead of German CPI

• The pair drops further and tests 1.1230/25, fresh lows.
• EMU Consumer Confidence improved a tad to -7.2 in March.
• German advanced CPI in focus later in the session.

The earlier bullish attempt to the 1.1260 region had no follow through, sparking a knee-jerk in EUR/USD to the current 1.1230/25 region, or new session lows.

EUR/USD focused on German data

Spot remains under pressure today and is losing ground from three sessions in a row, opening the door for a potential visit to the 1.1200 neighbourhood, always on the back of the continuation of the rally in the buck and souring risk appetite sentiment.

In fact, jitters over the global slowdown keep forcing yields in the G10 money markets to recede further, sustaining wider spreads vs. US yields and in turn lending extra legs to the greenback.

Data wise in Euroland and ahead of key preliminary inflation figures in Germany, the Consumer Confidence in the euro area came in at -7.2 for the month of March (vs. February’s -7.4), while ECB’s M3 Money Supply expanded 4.3% on a year to February, more than initially expected. In the same line, Private Sector Loans rose 3.3% from a year earlier.

Across the ocean, the final release of the US GDP for the October-December period will be in the limelight seconded by usual weekly Claims and Pending Home Sales.

What to look for around EUR

Market participants have left behind the recent and renewed dovish stance from the ECB, focusing instead on the broad risk-appetite trends, USD-dynamics and domestic data. Regarding the latter, and looking to the broader picture, the view of a slowdown in the bloc has been ‘confirmed’ in past days following disappointing advanced PMIs in core Euroland. This, in turn, should add to the idea of a ‘patient for longer’ stance from the ECB. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections, where the focus of attention will be on the potential increase of the populist option among voters.

EUR/USD levels to watch

At the moment, the pair is retreating 0.15% at 1.1227 facing immediate contention at support emerges at 1.1215 (2018 low Nov.12) seconded by 1.1176 (low Mar.7) and finally 1.1118 (monthly low Jun.20 2017). On the flip side, a break above 1.1307 (21-day SMA) would target 1.1359 (100-day SMA) en route to 1.1448 (high Mar.20).