- EUR/USD retreats from monthly high during three-day uptrend.
- Aggressive Fed rate hike bets scaled back on softer US inflation, growth figures.
- S&P 500’s best week in 1.5 years also favor buyers amid US bank holiday.
- German HICP, Eurogroup meeting eyed for fresh impulse.
EUR/USD struggles to extend the three-day uptrend around the monthly peak, retreating of late, as traders seek fresh clues amid a quiet Asian session. That said, the major currency pair dribbles around 1.0750 as the buyers jostle with the 50-DMA hurdle amid broad US dollar weakness, as well as anxiety ahead of the key data/events from the bloc.
Even if the market’s indecision and the US bank holiday restrict EUR/USD moves, the pair prints mild gains around 1.0750 amid the broad US dollar weakness. However, cautious sentiment ahead of preliminary readings of Germany’s headlines inflation gauge and the Eurogroup meeting seems to test the buyers.
That said, the US Dollar Index (DXY) remains depressed at around a one-month low close to 101.50 as mostly downbeat figures of the US consumption, income and inflation, as well as GDP, seem to have recently doubted the Fed’s 0.50% rate hikes post-September. The traders’ indecision also probed the US Treasury yields of late, which in turn weighed on the US dollar index and allowed markets to remain positive.
On Friday, the US Personal Consumption Expenditure (PCE) data came in mixed for April, mostly downbeat, as the Core PCE Price Index matched 4.9% YoY forecasts versus 5.2% prior. Further, Personal Income rose less than expected but the Personal Spending improved.
Other than the softer yields and easing bets on the Fed’s aggression, upbeat headlines from China, suggesting a faster easing of the covid-impressed activity restrictions, also help markets to remain positive, which in turn propel EUR/USD prices. “Shanghai said on Sunday ‘unreasonable’ curbs on businesses will be removed from June 1, as it looks to lift its COVID-19 lockdown, while Beijing reopened parts of its public transport as well as some malls and other venues as infections stabilized,” said Reuters.
At home, traders remain worried over the Eurozone’s oil embargo on Russian imports as well as the first readings of Germany’s Harmonized Index of Consumer Price (HICP) figures for May, expected 8.0% versus 7.8%.
Reuters already published a draft report suggesting no major sanctions for Russia during today’s Eurogroup meeting. However, the bloc is likely to remain supportive of Ukraine after Moscow’s recent attack.
It’s worth noting that an anticipated rally in German inflation numbers will offer additional strength to the European Central Bank (ECB) policymakers to back the 0.50% rate hike concerns, not to forget suggesting an interest rate lift in July. The same can help EUR/USD to refresh its monthly high. However, risk catalysts and the US market moves will act as extra filters to watch.
Technical analysis
Bearish RSI divergence suggests that the EUR/USD bulls are running out of steam, suggesting a pullback towards the early month peak near 1.0640. However, a daily closing beyond the 50-DMA hurdle, surrounding 1.0745 by the press time, won’t hesitate to challenge the late April high around 1.0940.