EUR/USD remains offered and below 1.0700 ahead of data, Lagarde

• EUR/USD starts the week on the defensive below 1.0700.
• Germany, EMU Services final Services PMIs came in mixed.
• ECB President C. Lagarde speaks later in the European session.

The single currency extends the corrective decline vs. the greenback and forces EUR/USD to break below the key support at 1.0700 the figure at the beginning of the week.

EUR/USD focused on data, ECB

EUR/USD slips back below the 1.0700 level and prints new 2-day lows near 1.0680 on Monday on the back of the continuation of the bid bias in the greenback and further weakness in the risk complex, all despite positive results from the Chinese PMIs gauged by Caixin earlier in the session.

Indeed, spot appears to resume the downtrend seen in past weeks and fades further last Thursday’s strong advance, returning to the sub-1.0700 region in response to the resumption of the buying interest in the greenback amidst rising yields on both sides of the ocean and investors’ repricing of a Fed’s pause at its meeting later in the month.

In the domestic calendar, final Services PMI in Germany and the euro area came in at 57.2 and 55.1, respectively, for the month of May. In addition, Germany’s trade surplus rose to €18.4B in April. Still in the region, ECB President C. Lagarde is expected to speak before the European Parliament later in the afternoon.

Across the pond, the ISM Services PMI will take centre stage along with Factory Orders and the final Services PMI tracked by S&P Global.

What to look for around EUR

EUR/USD retreats to the area south of the 1.0700 support following the resumption of the bid bias in the greenback on Monday.

In the meantime, the pair’s price action is expected to closely mirror the behaviour of the US Dollar and will likely be impacted by any differences in approach between the Fed and the ECB with regards to their plans for adjusting interest rates.

Moving forward, hawkish ECB speak continues to favour further rate hikes, although this view appears to be in contrast to some loss of momentum in economic fundamentals in the region.

Key events in the euro area this week: Germany Final Services PMI/Balance of Trade, EMU Final Services PMI/Sentix Index/Producer Prices (Monday) – Germany Construction PMI/Factory Orders, EMU Retail Sales (Tuesday) – Germany Industrial Production (Wednesday) - EMU Flash GDP Growth Rate (Thursday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle in June and July (and September?). 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 losing 0.13% at 1.0692 and faces initial support at 1.0635 (monthly low May 31) seconded by 1.0516 (low March 15) and finally 1.0481 (2023 low January 6). On the upside, the surpass of 1.0779 (weekly high June 2) would target 1.0810 (100-day SMA) en route to 1.0885 (55-day SMA).