EUR/USD heading for a test of April lows at 1.2215

• Breaches Friday’s low at 1.2250 on mixed Euro area PMIs.
• Higher Treasury yields continue to boost the demand for the USD.

The EUR/USD pair is seen meandering near three-week lows of 1.2245, after a series of mixed Euro area PMI releases capped the EUR recovery and triggered fresh selling interest from just shy of the 1.23 handle, as the bears now look to test of the April 6 low of 1.2215.  The Eurozone flash manufacturing PMI for April came in at 56.0 vs. 56.1 expected while the German flash manufacturing numbers stood at 58.1 vs. 57.5 expected.

Moreover, the spot remains pressured amid a renewed pickup in buying interest seen around Treasury yields across the curve, with 10-year rates now printing fresh four-year peaks at 2.994% - a whisker away from the 3 percent key figure. Rising Treasury yields bolster the demand for the greenback across the board, now pushing the USD index to five-week highs of 90.32, up +0.25% on the day.

With the Eurozone data out of the way, the focus now remains on the US flash PMI reports from Markit and existing home sales data. In the meantime, the price-action around Treasury yields will continue to drive the prices, with monetary policy divergence back in play ahead of the European Central Bank (ECB) policy decision due later this Thursday.

EUR/USD levels to watch

Karen Jones, Analyst at Commerzbank notes, “EUR/USD sold off in its range on Friday and hit our take profit/near-term target. It has eroded the 1.2272 2017-2018 uptrend, which is regarded as negative. But we suspect that in order to really generate some downside interest that we will need to see a close below the 1.2215 April low and the 1.2155 February low. We look for the cross to remain capped by the near term resistance line at 1.2420 and maintain a negative stance below here. Above 1.2420 lies the March highs at 1.2447/76”.