EUR/USD defends 1.1800, focus on EU, US consumer-centric data

  • EUR/USD pares intraday losses, extends bounce off day’s low.
  • US dollar struggles to cheer Treasury yields rebound, coronavirus concerns.
  • US-China tussles, Biden’s stimulus act as extra catalysts behind the sluggish markets.
  • Eurozone CPI, US Retail Sales and Michigan Consumer Sentiment will decorate calendar, qualitative factors are crucial.

EUR/USD picks up bids to 1.1810, reverses the early Asian losses, heading into Friday’s European session.

The quote’s latest recovery moves could be traced to the US dollar pullback amid a shift in the market sentiment, portrayed by the US Treasury yields and stock futures. That said, the US Dollar Index (DXY) remains unchanged on a day around 92.58 whereas the US 10-year Treasury yield snaps a two-day downtrend, up 2.2 basis points (bps) to 1.319% by the press time. Furthermore, Futures linked to S&P 500 and Euro Stoxx 50 also rebound at the time of press.

The coronavirus resurgence in the West and fresh concerns over the US-China tussles earlier contributed to the market’s risk-off mood. Also on the same line were chatters surrounding America-German ties to push back Russia as the German Chancellor meets US President Joe Biden. It’s worth noting that European Commission President Ursula von der Leyen will travel to Dublin on Friday and meet Irish Taoiseach Micheál Martin to discuss many issues including NI protocol, which in turn adds to the risk catalysts mentioned above.

On the contrary, US President Biden’s optimism over the passage of the infrastructure bill, as Democrats are united over $3.5 trillion demands, seems to keep the markets optimistic. Further, Fed Chair Jerome Powell’s rejection of the monetary policy adjustment need and mixed US data, out yesterday, offered an additional sigh of relief to the markets.

It’s worth noting that the inflation woes are getting firmer in the bloc and hence today’s final print of June’s Consumer Price Index (CPI) will be closely observed even as the figures are less likely to deviate from initial forecasts of 0.3% MoM and 1.9% YoY. On the contrary, anticipated firming in the US Retail Sales for June, likely +0.4% versus -0.7% prior, as well as expectedly strong the preliminary readings of the Michigan Consumer Sentiment Index, to 86.5 versus 85.5 previous, could keep Fed tapering concerns on the table. Hence, scheduled data may keep EUR/USD bears hopeful on meeting consensus.

Read: US June Retail Sales Preview: Analyzing major pairs’ reaction to previous releases

However, major attention will be given to the risk-related headlines for fresh impulse.

Technical analysis

EUR/USD failed to extend the bounce off a three-month low, staying inside a three-week-old falling wedge bullish formation amid the subdued MACD signals and a bumpy road to the north. Hence, the major currency pair may remain depressed surrounding the 1.1800 threshold. However, bears are likely to witness repetitive challenges from the formation’s support surrounding 1.1760, a break of which could refresh the yearly low near 1.1700.

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