A strong economy means a strong currency. The euro area PMI soaring to an 11-month high in April has become further proof of the bloc's accelerating economy. It doesn't matter that it entirely relies on the service sector, with the gap between its PMI and the manufacturing sector becoming the largest since 2009. What's important is that the region will avoid a recession, and its resilience opens the door for the European Central Bank to further raise interest rates, which positively reflects on EURUSD.

Dynamics of European business activity

Germany is once again becoming the locomotive of European economic growth: the Purchasing Managers' Indices for both Germany and France have exceeded forecasts. At the same time, ECB Vice President Luis de Guindos noted that core inflation in the eurozone turned out to be persistently high, even more persistent than the market expected. For the ECB not to lose confidence, the indicator should decrease. Such rhetoric implies that the central bank does not intend to rest on its laurels. Most likely, market forecasts about raising borrowing costs to 3.75% are accurate or slightly underestimated.

Bank of Ireland Governor Gabriel Makhlouf also argued that it was too early for the ECB to pause the monetary tightening process. He referred to the data available to the ECB, based on which the pause seems premature. It seems that ECB President Christine Lagarde's opinion that the central bank has little way ahead is at odds with the views of the Governing Council members. The ECB will undoubtedly raise the deposit rate at the May meeting. The question is by how much, 25 or 50 basis points?

Meanwhile, in the US, the situation is unfolding like a textbook: after rapid GDP growth, the Federal Reserve's monetary policy tightens, and then the American economy starts to wobble. Disappointing data on existing home sales, manufacturing activity from the Philadelphia Fed, and unemployment benefit claims suggest that a recession is near. If the US faces a downturn and the eurozone avoids it, why sell EURUSD?

For the week leading up to April 21, the economic calendar will present investors with another puzzle. The key events will be the data releases of German and European GDP data for the first quarter, the flash estimate of April inflation in Germany, and statistics on the Personal Consumption Expenditures Index – the Fed's preferred inflation indicator. Almost all important figures will be released at the end of the five-day period, so most of it will involve buying on the facts. The question is, what will be purchased: the US dollar or the euro?

Technically, the EURUSD pair has approached the upper limit of the fair value range of 1.08-1.101. A successful attack will make it possible for the bulls to restore the uptrend towards 1.12 and will form the basis for establishing long positions.