BUZZ-COMMENT-Window of opportunity for EUR/USD to retest 1.05

Feb 20 (Reuters) - With a look to the upcoming flash PMIs out of the euro area, there is a window of opportunity for EUR/USD retesting 1.0500-30. ECB hawks have opened up the debate for a possible pause in rate cuts as soon as the April meeting. However, given the looming threat of tariffs, this looks somewhat premature. If we see a notable pick-up in the latest PMI figures, this would certainly support the hawkish scenario.

Using the German ZEW survey data as a guide, which saw both current conditions and economic sentiment pick-up in February, the odds look to be in favour of stronger German PMI figures.

With a 3-year lookback period and comparing with German composite PMI, the results are as follows.

- If economic sentiment rose, composite PMI was up from the prior month 13 out of 23 times.

- If current conditions rose, composite PMI was up from the prior 11 out of 14 times.

- If both economic sentiment and current conditions rose, composite PMI was up 9 out of 11 times.

Consequently, short-term risks appear to be skewed towards a bounce back to 1.0500-30. But despite the room for a rebound in EUR/USD, longer term risks remain tilted to the downside for the pair. As we have seen previously, 1.0500-30 has kept a lid on the recovery, further resistance also sits at 1.0600-30.

While the dollar has experienced a setback of late, the economic backdrop remains supportive of the dollar, particularly with the looming threat of tariffs.

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