Euro drifting close to 1.21

EUR/USD is almost unchanged in the Tuesday session. In the European session, EUR/USD is trading at 1.2078, down 0.06% on the day.

Germany, the largest economy in the eurozone, releases consumer confidence data on Wednesday (6:00 GMT). GfK Consumer Climate has been mired in negative territory since March 2020, when the Covid-19 pandemic reached Germany and caused a severe downturn in the economy. The good news is that the declines have been easing since a sharp drop of 15.6 in January. The March reading improved to -6.2 and the April forecast stands at -4.1 points.

The country’s business sector has been more positive about economic conditions. On Monday, the Ifo Business Climate index improved to 96.8 in April, little changed from 96.6 a month earlier. This reading missed the estimate of 97.8, but the euro still posted strong gains on Monday.

Despite the optimism from the business sector, the services sector in the eurozone is struggling, and Germany has not been immune. In March, PMIs for France, Germany and the eurozone were just above the neutral 50 level, which indicates that services are stable but not expanding. The lockdown in Germany has taken a toll on the economy, and the market is bracing for a contraction in first-quarter GDP on Friday, with a forecast of -1.5%. Investors may not be in a forgiving mood if Germany shows a decline in growth, and the euro could lose ground as a result.

Investors will be keeping a close eye on the FOMC meeting on Wednesday (18:00 GMT). The Federal Reserve has insisted that it will not stray from its dovish stance and is not contemplating a taper, but as the economy heats up and inflation moves higher, the market will be looking closely for any clues about plans to tighten policy.

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EUR/USD Technical

• EUR/USD faces resistance at 1.2151, followed by resistance at 1.2204
• On the downside, there is support at 1.1994, protecting the symbolic 1.20 line. The next support level is 1.1890

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