In the midst of a four-day slump, the EUR/USD remains depressed, hovering around a three-month low.
The US dollar is supported by rising Treasury yields and a slew of positive stories.
Additional directives from ECB’s Lagarde can be found in German Retail Sales.
EUR/USD is trading around 1.1850 for the fourth day in a row, down 0.07 percent intraday heading into Thursday’s European session. The currency major pair fell to its lowest level since early April the day before, but a four-month-old horizontal support test bears.
As market participants seek protection amid growing coronavirus (COVID-19) concerns in Asia-Pacific, the US dollar index (DXY) seesaws around the highest levels in three months, flashing on Wednesday. However, Australia is experiencing local lockdowns because to a higher covid count, while Indonesia is facing a national emergency from July 2 to July 20. In addition, the UK will have the highest infection rate in 2021.
Aside from virus-induced risk aversion, the USD is supported by positive US statistics and market optimism for the world’s largest economy. On Wednesday, both the ADP Employment Change and the Chicago Purchasing Managers’ Index in the United States defied market expectations, raising chances for a stronger US Nonfarm Payrolls report (NFP). The greenback bulls, on the other hand, are wary ahead of today’s ISM Manufacturing PMI, which is predicted to be 61.00 versus 61.2 before.
Read: ISM Manufacturing Predictions for June in the United States Although expansion is expected to continue, how serious is the labor shortage?
The increasing likelihood of the US Federal Reserve (Fed) making monetary policy adjustments, reinforced by recent hawkish Fedspeak, also favors the US dollar.
Inflation in the EU, on the other hand, met optimistic expectations but remained considerably below the ECB’s target. As a result, EUR traders will be looking for further confirmation of the Pandemic Emergency Purchase Program (PEPP) tapering in German Retail Sales and ECB President Christine Lagarde’s address. However, German Retail Sales for May are expected to increase by 10.1 percent compared to 4.4 percent in April, putting pressure on the Bundesbank to tighten monetary policy.
In this environment, US 10-year Treasury yields have recovered from their weekly lows, while stock futures have been moderately bid by press time.
To support the EUR/USD bears, the ISM PMI details must back up hopes of a stronger NFP print. Despite ECB’s Lagarde’s denial, any letdown may have a small chance of attracting buyers with negative sentiment and forecasts of particularly weak fundamentals from Europe.
EUR/USD sellers are encouraged by a bearish MACD and continuous trading below the 10-day SMA (DMA), as well as a declining trend line dating back to early June. To hold the reins, they’ll need a decisive break of the 1.1845 support level, which includes lows from early March and late June./n
