The EUR/USD pares intraday losses and extends its recovery from the day’s low.
The US dollar is struggling to keep up with a rise in Treasury yields, as well as concerns about the coronavirus.
The US-China squabbles, as well as Biden’s stimulus, serve as additional drivers for the market’s sluggishness.
The Eurozone CPI, US Retail Sales, and Michigan Consumer Sentiment will adorn the calendar, and qualitative aspects will play an important role.
Heading into Friday’s European session, the EUR/USD picks up bids to 1.1810, reversing early Asian losses.
The recent recovery moves in the quotation can be related to the US dollar’s retreat amid a shift in market sentiment, as seen in US Treasury yields and stock futures. However, the US Dollar Index (DXY) is flat on the day, hovering around 92.58, while the US 10-year Treasury yield breaks a two-day downtrend, rising 2.2 basis points (bps) to 1.319 percent by press time, snapping a two-day decline. At the time of publication, futures linked to the S&P 500 and the Euro Stoxx 50 had also recovered.
The recurrence of the coronavirus in the West, as well as new fears about the US-China trade war, added to the market’s risk-off mood earlier. As the German Chancellor met with US President Joe Biden, there were also whispers of strengthening US-German ties to drive Russia back. It’s worth mentioning that European Commission President Ursula von der Leyen will visit Dublin on Friday to meet with Irish Taoiseach Micheal Martin to discuss a variety of matters, including the NI protocol, which adds to the risk triggers already stated.
On the contrary, US Vice President Joe Biden’s optimism about the infrastructure bill’s passing, as Democrats coalesce behind $3.5 trillion demands, appears to be keeping the markets upbeat. Furthermore, markets breathed a sigh of relief after Fed Chair Jerome Powell rejected the necessity for monetary policy change and mixed US data released yesterday.
It’s worth mentioning that the bloc’s inflation difficulties are worsening, thus today’s final print of June’s Consumer Price Index (CPI) will be keenly scrutinized, even though the data are unlikely to depart significantly from original expectations of 0.3 percent MoM and 1.9 percent YoY. On the other hand, forecast firming in US Retail Sales for June, likely +0.4% versus -0.7% previously, as well as expectedly strong preliminary readings of the Michigan Consumer Sentiment Index, to 86.5 versus 85.5 previously, may keep Fed tapering fears alive. As a result, upcoming data may keep EUR/USD bearish optimistic about reaching consensus.
Read: June Retail Sales Predictions in the United States: Examining Major Pairs’ Reactions to Previous Releases
For a new impulse, however, the risk-related headlines will be given special emphasis.
Despite suppressed MACD indications and a difficult road to the north, the EUR/USD failed to extend its comeback from a three-month low, holding inside a three-week-old falling wedge bullish shape. As a result, the major currency pair may remain lower near the 1.1800 level. Bears, on the other hand, are likely to face repeated assaults from the formation’s support around 1.1760, which, if broken, might reintroduce the yearly low near 1.1700./n
