• EUR/USD is under pressure and goes below 1.0700.
• C.Lagarde from the ECB will speak later at the WEF in Davos.
• The FOMC minutes will be the defining event later in the NA session.

Sellers seem to be back and forcing EUR/USD to break below key support at 1.0700 on Wednesday.

EUR/USD focuses on Lagarde and the FOMC

After two consecutive daily advances, EUR/USD is now facing a downward correction and retreating to the region below 1.0700 amid the resurgence of the supply bias on the greenback.

In the meantime, yields on both sides of the ocean are keeping the consolidation phase firmly in place, as the recent surge in appetite for riskier assets appears to be waning on Wednesday.

Earlier in the session, Germany’s GDP growth rate rose 3.8% YoY in the first quarter and consumer confidence tracked by GfK improved slightly to -26 for the month of June. In France, consumer confidence remained below expectations in May at 86 (vs. 87 in April).

In the NA session, weekly mortgage applications are expected to be supported by durable goods orders, while the release of FOMC minutes will close out the daily calendar later in the day.

What to look for around the EUR

The strong rally in EUR/USD broke above the 1.0700 mark on the strong resurgence in risk sentiment.

Despite the pair’s current bullish momentum, the broader outlook for the single currency remains in negative territory for the time being. As usual, spot price action should reflect dollar momentum, geopolitical concerns and the divergence between the Fed and the ECB.

Occasional pockets of strength in the single currency should, however, appear bolstered by speculation that the ECB may raise rates at some point in the summer, while higher German yields, high inflation and a decent pace of economic recovery in the region are also favorable to an improvement in the atmosphere around the euro.

Main events in the euro zone this week: German final Q1 GDP, GfK consumer confidence, ECB Lagarde (Wednesday).

Significant problems on the rear boiler: speculation on the start of the hiking cycle by the ECB as early as this summer. Post-pandemic asymmetric economic recovery in the Eurozone. Impact of the war in Ukraine on the region’s growth prospects.

EUR/USD levels to watch

So far the spot is losing 0.72 at 1.0675 and a break of 1.0459 (18th May low) would target 1.0348 (13th May 2022 low) en route to 1.0340 (low of 2017 of January 3, 2017). On the other hand, the next bullish barrier lines up with 1.0748 (monthly high from May 24), followed by 1.0779 (55-day MMS) and finally 1.0936 (weekly high from April 21) .